By Anna Chibamu
ZIMBABWE’s economy is expected to remain on an upward growth trend during the remainder of the year, with the Gross Domestic product (GDP) expected to peak to 7,8% from the 2021 National Budget projections of 7,4%, Finance minister Mthuli Ncube has said.
Presenting the Mid-Term Budget Review in the National Assembly Thursday afternoon, Ncube said there has been a significant decline in inflation of over 700% from 837% in July 2020 to 106,6% in June, 2021 owing to several reasons among these, the fiscal and monetary consolidation measures being implemented by government.
Ncube also attributed the growth rate on good rains received during the last season, higher international mineral prices, a stable macro-economic environment and Covid-19 pandemic response measures, including the vaccination programme.
“The strong rebound of the economy is anchored on a better 2020/21 rainfall season, higher international mineral commodity prices, stable macroeconomic environment and COVID-19 pandemic response measures, including vaccination program. Higher growth rates are projected in agriculture, electricity generation, accommodation and food services, as well as financial services,” Ncube said.
The July year-on-year inflation stands at 56,37% and 2,56% for month-on-month inflation whilst month-on-month inflation is expected to remain stable at less than 3% during the second half of the year.
“Annual inflation is expected to decline further by the end of August 2021 and further to between 22% and 35% by December, 2021. Mr Speaker Sir, the current price and exchange rate stability will go a long way in supporting industry in making long term investment decisions and allow for the efficient allocation of resources. In this regard, the Treasury and the Central Bank will continue to pursue strong monetary and fiscal policies that sustain the current dis-inflationary path,” Ncube added.
The period Jan-June 2021 saw revenues estimated at $198,2 billion, whilst expenditures were about $197,6 billion, resulting in an almost balanced budget position, with a small surplus of ZWL$570 million.
The country’s external sector position has remained strong in support of the country’s balance of payments requirements, as well as stabilising the exchange rate.
“Notwithstanding the transitory current account deficit realized during the first quarter of 2021, the current account balance for 2021 is projected to remain in a surplus position, albeit at a moderated level of US$611.6 million, compared to US$1 096 million recorded in 2020. As at end December 2020, total Public and Publicly Guaranteed external debt including RBZ external guaranteed debt amounted to US$10.5 billion, representing 71.2% of GDP. External debt arrears alone make up over US$6.5 billion (77%) of total external debt.”
Overall expenditures during the period January to June 2021 stood at $197,6 billion, implying expenditures were above the half year target of $189,8 billion by $7,8 billion. 31. Major expenditures were on Compensation of Employees at $80 billion against a target of $73,8 billion and Non-Financial Assets (capital budget) at $67,4 billion against a target of $58 billion
The country’s diaspora remittances continue to stabilise the economy as seen by an increase between January and June 2021 where the country received US$746,9 million in diaspora remittances compared to US$288,7 million received during the same period last year.
Ncube said the remittances are projected to continue to drive the current account surplus in 2021, with end year projection of US$1,3 billion.