The new dispensation led by President Mnangagwa crafted the
TSP (2018-2020) to bring about macro-fiscal stability and laying a solid
foundation for private sector led growth after years of stagnation under the
previous regime. The TSP ends this year and, among other key objectives, sought
to build confidence in Zimbabwe through normalising relations with the global
community, deepening democratisation of the country, fostering an improved
business environment and high standards of service delivery across the
spectrum.
The economy has, however, suffered setbacks such as
climatic shocks in the form of drought and cyclones, energy challenges,
currency volatility, other unforeseen macro-economic risks and recently the
Covid-19 pandemic. While these have resulted in slow recovery, Zimbabwe is now
on a favourable ground to aggressively take off going forward, riding on the successful
reforms achieved so far, said Finance and Economic Development Minister
Professor Mthuli Ncube.
He revealed this in his Progress Report on Economic Reforms
under the TSP and the Crafting of the National Development Strategy 1 (NDS
20201-2025), that was issued yesterday. The next NDS programme will be
Integrated Results Based Management (IRBM) compliant and already indicative
national priorities have been crafted. Cabinet has also approved the concept
note. Prof Ncube stated that major milestones have been scored on the reform
agenda with macro-fiscal stabilisation now in full force as well as other
cross-cutting economic enablers.
Regarding fiscal consolidation, Prof Ncube said the
Government has managed to eliminate the twin fiscal and current account
deficits with the country now in surplus mode. For instance, about $800 million
surplus was realised between January and June 2020, building up from the
initial $395 million surplus achieved in December 2019.
“The surpluses serve as a buffer for shocks such as the
impact of Cyclone Idai, drought and Covid-19 pandemic. Surpluses are also
supporting social services delivery, social protection and infrastructure
development,” said Prof Ncube.
These are being buttressed by enhanced revenue collections
and sealing of leakages, as well as expenditure containment. In support of
monetary policy on containing money supply and hence inflation, Prof Ncube said
recourse to Central Bank overdraft was a thing of the past while the issuance
of Treasury Bills is now only for budget purposes. He said the public wage bill
was now below 50 percent of total revenues from about 92 percent in 2017.
Government has also rationalised posts and froze hiring of
more workers, save for critical sectors. Prudent public finance management
controls have been rolled to all departments and local levels while a new
procurement Act is now functional.
Significant ground has been covered in refining and
strengthening monetary policy to sufficiently support fiscal policy for
stabilisation with inflationary pressures now kept under check. The
introduction of the foreign exchange Dutch Auction system in June this year has
greatly reduced exchange rate instability and improved price discovery.
A second auction system for small-scale operators has also
been introduced to assist producers. The exchange rate, which had moved from
ZWL$25:US$1 to around ZWL$83:US$1; has since stabilised around that level
during the better part of July, August and September 2020.
“Price stability is now visible in line with convergence of
parallel and auction rates,” said Prof Ncube.
The Government has successfully re-introduced the local
dollar, which is now trading alongside other currencies with a noticeable
continued downward trend on reserve money to $13,35 billion by August 2020 from
$16,66 bn in July 2020. The country is now implementing an exchange rate linked
Open Market Operations (OMOs) investment instrument settled in local currency
to allow wealth holders to preserve their value. The bursting of the
speculative bubble on the Zimbabwe Stock Exchange driven by dually listed
shares and the curbing of speculative borrowing through appropriate interest
rates adjustments (recently increased from 15 percent to 50 percent then further
to 70 percent for the RBZ overnight window), have also worked well for the
economy, said the minister.
Furthermore, the Government has streamlined operational
lines of mobile banking operators and introduced interoperability of platforms
by adopting a national switch. The TSP period also saw removal of fuel,
electricity and gold subsidies, which were too costly for the Treasury. To
strengthen the viability of financial services, the Government has extended the
minimum capital requirements deadline to 2021 as well as introduced an auction
market for Treasury Bills.
The Treasury now projects that annual inflation will
consistently drop in line with the reduction in the month-on-month inflation
from 31,7 percent in June 2020 to around five percent in the last quarter of
2020.
The drive to promote savings mobilisation within the public
has to date yielded $768,3 million as at 30 June 2020 from an initial Treasury
seed money allocation of $70,4 million. Another key milestone is the
establishment of the Victoria Falls Stock Exchange (VFEX), which will play a
key role in attracting increased offshore investment and deepening capital
markets. To plug the patient capital gap in the market Government has set up a
$500 million National Venture Fund, which will be periodically reviewed. The
new dispensation has also rolled out major structural reforms. In the political
arena these included the alignment of laws to the new Constitution, governance
and institutional reforms covering aspects such as devolution, compensation of
former farm owners, state owned enterprises reform, ease of doing business,
competitiveness and budget transparency. In July, Government and commercial
farmers signed the Global Compensation Deed Agreement. The agreement settled
for an agreed amount of US$3,5 billion to be paid to former commercial farmers
for improvements, land clearing and biological assets. To date, more than $2
billion has been disbursed to finance devolution projects countrywide.
To entice investors and enhance ease of doing business the new dispensation has abolished the indigenisation and economic empowerment regulations. This, and other comprehensive reforms, have seen Zimbabwe’s 2020 World Bank ranking settling at 140 from the previous position of 155. Essentially, the country has improved by 15 positions and is one of the top 20 on the world and top five in Africa doing business reformers, according to the 2019 World Bank report. Moreover, Zimbabwe is now ranked third in Southern Africa on budget transparency by the Open Budget Survey (OBS) of 2019, with a Budget Index Score of 49, up from 23 recorded in 2017. Within the last two years, the Government completed the land audit and replaced the Command Agriculture financing model with a private sector funded option. The farm downsizing in progress while 1.8 million farmers have been trained for Intwasa/Pfumvudza technique meant to boost food production this season.
The mining sector, which is currently contributing about
eight percent to the Gross Domestic Product is targeting a US$12 billion mining
industry by 2023, which represents a 344 percent increase from the USD2,7
billion achieved in 2017. Similarly, the manufacturing sector has launched the
Zimbabwe National Industrial Development Policy (2019-2023) and now pursues an
export-led industrialisation agenda with about US$2 billion required for
retooling.
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