Poorly economy overshadows Chinamasa’s mid-term budget

Poorly economy overshadows Chinamasa’s mid-term budget

By Kuda Chideme, HARARE, July 19 (The Source) – Finance Minister Patrick Chinamasa will on Thursday take to the Parliament to review the country’s performance in the half-year and give an outlook for the rest of the year.

Usually a big news event met with high anticipation, the midterm review, this year has not generated as much interest, the reason being that nothing much has changed since the minister presented his 2017 budget last December.

The economy remains in disarray, industry is in abyss, the liquidity situation is getting worse and bank queues have become a permanent feature. There however has been a marked migration to digital payment platforms, but the infrastructure is hugely overwhelmed by the sheer volume of transactions.

The 2017 budget came just a month after the introduction of bond notes with promises from authorities that the situation would improve but that has not been the case. The central bank actually intends to print more bond notes with the governor last week disclosing that negotiations are ongoing to extend the $200 million Afrexim Bank facility which backs the surrogate currency. So far $160 million worth of bond notes have been put into circulation.

What would be of interest though is how Chinamasa intends to deal with the country’s fiscal deficit which continues to spiral out of control as authorities fail to contain spending at a time when revenues remain depressed.

Treasury has projected a budget deficit of $400 million this year after overspending by $1,4 billion last year — from an initial projection of $150 million. But latest available figures show that government overspent by $230 million in the first quarter of this year after gobbling $1,1 billion against revenue of $869 million, an indication that the actual deficit will surpass the target.

Analysts have raised concern over the manner in which government continues to sink itself in debt, borrowing from the domestic market and crowding out local business. Currently the domestic debt stands $4 billion while international lenders are owed $7 billion.

The process of re-engagement with multilateral lenders appears to have stalled. The International Monetary Fund (IMF) noted in a recent report that despite settling its arrears with the Fund, Zimbabwe is still yet to reach a deal with the World Bank and other multilateral lenders, some 21 months after the arrears clearance agreement was penned in Lima, Peru.