Zimbabwe 2017 budget: what to expect

Zimbabwe 2017 budget: what to expect

HARARE, December 8 (The Source) – A story is told of the world’s most optimistic boy who pines for a pony for Christmas. Come Christmas morning, he finds a rather oversized box under the Christmas tree. Expectant, the boy rushes to open the box, only to find horse manure. Far from being deflated, his face lights up. The horse manure means there must be a horse somewhere, surely!

Zimbabwe’s Finance Minister Patrick Chinamasa will today present the 2017 national budget, which is expected to project $4 billion revenues and an optimistic 4.8 percent economic growth driven by agriculture, manufacturing and construction.

Chinamasa’s 2017 growth projection is at significant odds with the IMF’s forecast of -2.5 percent and his expectation of an upswing in agriculture, manufacturing and construction could looks distinctly pollyannaish.

Ahead of the 2017 budget presentation this afternoon, here is what we expect, based on Treasury’s pre-budget paper:

· Zimbabwe expects economic growth of 4.8pct vs1.2 pct for 2016. IMF projected -0.3pct growth for 2016 and -2.5pct for 2017.
· Revenues of about $4 billion, 26pct of GDP.
· Expenditures of about $5 billion, 28pct of GDP.
· Funding gap of about $1 billion, excluding loan repayments.

Key 2016 figures

· Total expenditure of $4.69bn this year, against $3.65bn revenues, giving a $1.04bn budget deficit or 7.42 percent of GDP vs projection of $150mln budget deficit for 2016. This widened to $1.04bn on slow pace of reforms and weak GDP growth, grain imports due to drought.

· Zim spent $2.4bn on wages between Jan-Sept 2016, 95 percent of revenues for that period.

· Current account deficit seen at $1,1 billion in 2016, to drop to $780 million in 2017.

· Exports to September 2016 at $1.766 bln vs $3.788bln imports. Trade deficit for nine months at $2.013 billion.

What to look out for

An update on World Bank/AfDB debt repayment plan and more on the re-engagement process.

More on civil service restructuring

Chinamasa says the June 20 import ban under the Statutory Instrument 64 of 2016 has increased manufacturing capacity by 30-50 percentage points in three months. So we can expect more tax and other fiscal incentives to stimulate the supply side in the productive sectors.
· Tax incentives under Special Economic Zones
· Tighter regulation for mining, especially gold to curb leakages. More emphasis on mining beneficiation.