Zimbabwe Finance Minister Mthuli Ncube presents his budget today.

ZIMBABWE’S Finance minister Mthuli Ncube presents his mid-term budget review statement in Harare today with business urging the government to stay the course of its current fiscal and monetary policies that are beginning to bear fruit.

Ncube’s statement comes amid general business optimism over Zimbabwe’s economic trajectory despite a number of recent shocks that include the threats posed by the resurgent coronavirus pandemic and the devastating riots that hammered regional powerhouse South Africa two weeks ago.

It also comes as both fiscal and monetary authorities have instituted significant reforms over the past year, which have seen the economy showing signs of recovery — eliciting positive and welcome comments from Bretton Woods institutions recently.

Not surprisingly in this regard, the country’s once sky-high inflation has tumbled dramatically to 2,56 percent month-on-month as of July, from June’s 3,88 percent, while the re-introduced local currency has remained relatively stable on the back of the Reserve Bank of Zimbabwe (RBZ)’s weekly forex auctions.

Employers Confederation of Zimbabwe president Israel Murefu told The Financial Gazette yesterday that maintaining the current relative macro-economic stability was vital for business as the government continued to fix the economy — with key indicators such as inflation and the exchange rate always potential areas of concern for both commerce and industry.

“While there are other issues like energy, the condition of infrastructure like the road and railway networks, as well as water supply that need to be attended to in order to bring the cost of doing business down, it is the key macro-economic fundamentals that are priority number one for business.

“The former issues can always be attended to as we move forward with the economic reform agenda, while the latter ones (critical macro-economic factors) must be given utmost priority by the authorities,” he emphasised.

Murefu also said policy consistency was key to achieving the required stability in this regard.

“Macro-economic stability is one of the fundamental elements for sustainably doing business in any economic environment the world over.

“If the 2022 national budget can create that stability, that would be one of the biggest gifts that policy makers can bestow on business because it makes planning, budgeting, forecasting and the making of investment decisions much easier, simpler and less cumbersome.

“Macro-economic stability and policy consistency, as well as minimising red tape — especially within the context of the ease-of-doing business — will result in the creation of a conducive business environment that enterprises have always been yearning for in a long time.

“We expect inflation to continue to fall and to move to single digit levels.

“Monetary and fiscal policies must also continue to converge around managing inflation and the stability of the exchange rate … coupled with finding a solution around diminishing the widening gap between the official auction rate and the alternative market rate, which is key to creating the right environment for businesses,” Murefu added.

He also said continuing to manage the budget deficit to the barest minimum — or if possible, to even a small surplus — would also assist in creating a conducive economic climate where businesses would have “less headaches” to grapple with.

Similarly, Murefu said, there was need to continue with policies that boosted exports to increase the availability of foreign currency in the country and influence the strengthening of the Zim dollar, while productivity and capacity utilisation also needed to be ramped up to avoid commodity and product shortages.

This was particularly important given the disruptions that recently occurred in South Africa, which had the net effect of adversely affecting supply chains to the local and regional markets.

“This will, however, have to be balanced with the need to enhance safety given the impact of Covid-19, which we expect to be mitigated somewhat by the accelerated vaccination drive nationally. This will also impact employment figures positively as these factors influence job numbers,” Murefu said further.

Economist Eddie Cross also said the government should continue on its current path because this was beginning to produce the right results.

“I think the main thing is to stick to what we are currently doing because it’s working. We must maintain fiscal discipline and restrain money creation.

“We also need to ensure that the private sector is supported in every way we can. Overall, I don’t expect any major changes,” he said.

Zimbabwe National Chamber of Commerce chief executive Chris Mugaga said in addition to the widening foreign currency exchange rate gap, Ncube’s statement today needed to address a number of other critical areas of the economy.

“The widening gap between the official exchange rate and the parallel market rate is the big elephant in the room.

“So, it’s important to set the right policy environment. The minister also needs to look at the health sector and urban infrastructure, that have literally collapsed. We need a robust framework for public-private partnerships.

“He must also look into the issue of integrating the national exports policy and the industrialisation policy, and he also needs to push for the expedition of the Mines and Minerals Act,” Mugaga said.

“This will bring policy clarity in the sector to deal with issues such as the smuggling of minerals. We are currently losing 25 to 30 percent of every potential dollar of proceeds through underhand means,” he added.

The business chamber also believed that the consignment-based conformity assessment that was run by Bureau Veritas to deal with the flow of sub-standard goods into the country needed to be stepped up.

The categories of goods regulated under the programme included food and agriculture products, building and civil engineering, petroleum and fuels and packaging materials.

This comes as the government has projected the economy to grow significantly this year and by about 5,4 percent in 2022, anchored on agriculture and growth in the mining and manufacturing sectors.

Authorities have also insisted that economic stability remains key to their policies, with Ncube saying recently that measures put in place to cushion the local currency were sustainable and being strengthened.

“We expect year-on-year inflation in the teens and month-on-month inflation averaging two percent and below.

“So, we are on track for that trend in terms of macro stability and growth is coming through,” he said.

At the same time, the World Bank (WB) recently commended the government’s economic recovery framework, noting that Zimbabwe was poised to register economic growth this year despite challenges that include Covid-19.

It said the country’s gross domestic product (GDP) growth would likely rise by 3,9 percent in 2021 — which would be a significant improvement after two years of decline.

On its part, the African Development Bank (AfDB) has projected a 5,6 percent economic growth this year for the country, driven by the recovery in the agriculture, mining and tourism sectors.

“The IMF has upgraded its growth rate for Zimbabwe to six percent (in 2021), and this in a sense, affirms what we were predicting all along. The WB has also projected positive growth, with the AfDB doing the same.

“So, you see a similar sentiment coming through that indeed the Zimbabwe economy is on a rebound and macro-economic stability has been engendered,” Ncube said.

He added that authorities would continue to support and fine-tune the foreign currency auction to make it even more efficient. – The Financial Gazette