Full Zimbabwe 2018 national budget statement

Download here: 2018 Budget Statement Final

Fiscal Imbalances

• At the heart of the economy’s fundamental economic challenges is an unsustainable Budget deficit, whose financing through issuance of Treasury bills and recourse to the overdraft with the Reserve Bank is untenable.
• This is also at the core of factors driving the demand for foreign exchange, as well as creation of excess money supply, which is largely in the form of electronic RTGS and mobile money balances.
• These money balances are accessible through RTGS transactions, card swipes, as well as such mobile platforms as Eco-Cash, One-Money and Tele-Cash. Physical cash is a small proportion of the economy’s overall financial sector liquidity.
• Money creation, through domestic money market instruments which do not match with available foreign currency, only serves to weaken the value of the same instruments, translating into rapid build-up in inflationary pressures, to the detriment of financial and macro-economic stability.
• This has seen growing mis-matches between electronic money balances and the stock of real foreign exchange balances, as reflected by cash holdings and nostro balances of banks.

15:51 Government has adopted a zero tolerance on land barons.

15:49Civil servants bonuses will be paid in 2018 but will be staggered.

15:36 On indigenisation, Government is, through the Finance Bill being submitted to this August House for the 2018 financial year, amending the Indigenisation and Empowerment Act, to bring the following into effect from April 2018:

Diamonds and platinum are the only sub-sectors designated as ‘extractive.’

Accordingly, the proposed Amendments will confine the 51/49 Indigenisation threshold to only the two minerals, namely diamonds and platinum, in the extractive sector.

The 51/49 threshold will not apply to the rest of the extractive sector, nor will it apply to the other sectors of the economy, which will be open to any investor regardless of nationality.

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15:30 State Enterprises that exhibit potential will be reformed, while those which cannot be rehabilitated will be privatized or face outright closure.

15:21 A number of public officials continue to be engaged in the public service well beyond their retirement age. In this regard, from January 2018 Government will, through the Service Commissions, retire staff above the age of 65.

15:16 Money creation, through domestic money market instruments which do not match with available foreign currency, only serves to weaken the value of the same instruments, translating into rapid build-up in inflationary pressures, to the detriment of financial and macro-economic stability.

15:16 The mis-match between the supply and demand for foreign exchange, has also led to the emergence of foreign exchange premiums in the market.

15:12 Chinamasa highlighted that dealing with corruption in the economy was paramount. Re-engaging of the international community and having a free and fair election in 2018 will help Zimbabwe grow.

15:09 The governemt should increase the use of plastic money in rural ares traders must accept mobile money. Exports will be critical in dealing with the ongoing problem of cash shortages.

15:07 Inflation in 2018 is expected to average 3 percent.

15:05 “Our economy has not been performing to its potential and to the expectations of the citizenry, as demonstrated by low production and export levels, and the resultant prevailing high levels of unemployment, and a continuing deterioration in macro-economic stability”

15:00 Chinamasa now presenting the 2018 national budget

In retrospect:

In his 2017 national budget presentation, pegged at US$4 billion, Finance minister Patrick Chinamasa pledged to cut government expenditure, with the following highlights:

• Economy to grow by 1,7% in 2017
• Revenue of US$2,876 billion collected between January and October 2016 against a target of US$3,158 billion, a negative variance of 9,8%
• Cumulative expenditure for January to October 2016 amounts to US$3,84 billion against a target of 3,32 billion, representing US$520 million overspend.
• Employment costs to gobble 91% of revenue
• Exports decline by 6,9% to US$3,365 billion
• Import bill stands at US$5,35 billion against exports of US$3,365billion
• A total of US$17 million of bond notes injected into the banking system
• Freeze in prices and fees charged by public entities
• Five cents health levy for every dollar spent on airtime and data
• Resuscitation of Ziscosteel on the cards
• Agriculture, which experienced a 3,7% decline in 2016, expected to grow by 12% in 2017
• Mining sector seen growing by 0,9% in 2017
• Manufacturing sector seen growing by 0,3%
• 15% platinum tax reprieve extended to 2017
• Growth rate of between 0,3 to 3% anticipated in other sectors in 2017
• Capital inflows of US$692,4 million expected in 2016 against US$1,2 billion in 2015
• Formal remittances fall to US$780 million in 2016 from US$935 million in 2015
• Stock market turnover between January and October 2016 slumps by 29% to US$144,46 million.
• Primary and secondary education ministry gets highest vote of US$800,3 million followed by Home Affairs allocated US$364 million
• Defence ministry allocated US$340,5 million while health and agriculture sectors receive US$208 million and US$244 million respectively.
• Wheat flour, luggage ware and school uniforms removed from the open import licence with effect from January 1 201

Meanwhile, on his inauguration speech last month, Zimbabwe’s new president Emmerson Mnangagwa pledged his government would engage the international community as he seeks to revive a collapsed economy after years of corruption and mismanagement.

As Chinamasa presents his budget today, it remains to be seen how government coffers were spent, and what the future looks like for Zimbabwe.