Zimbabwe Revises Downwards 2022 Growth Projections to 4,6% Amid High Inflation, COVID-19 PandemicFinance Minister Mthuli Ncube says the government has revised downward its 2022 growth projections due to high inflation, COVID-19 and other serious global issues. In his budget review, Ncube said, “The domestic economic situation continues to be impacted by the COVID-19 pandemic, compounded by the recent global tensions, with spill overs being felt through fuel, food and fertilizers price increases and shortages globally. The attendant spill over effects have changed the economic outlook, both globally and domestically.” He said these challenges have resulted in rising commodity prices and inflation worldwide and is dampening global growth prospects. “As a result, the IMF has revised downwards global economic growth projections to 3.6% in April 2022, down from the initial projection of 4.9% in January 2022. Recovery in the Sub-Saharan region is expected to slow down to 3.8% during 2022, benefiting from high commodity prices and recovery in tourism but being weighed down by high import costs, particularly for food, fuel and fertilizer. Inflation has also become a central cause of concern worldwide, reaching its highest level in more than 40 years for some advanced economies, particularly for the United States and some European countries.” He said the domestic economy has not been insulated from the global developments, particularly from rising commodity prices and inflation as well as disruptions on supply chains. “As a result, domestic economic growth for the year 2022 has been revised downwards from the 5.5% initially projected to 4.6%, reflecting the impact of the external global environment as well as our own unique circumstances. Growth has also been weighed down by reduced output from the 2021/22 agriculture season, while other productive sectors are still projected to register positive growth.” Ncube said notwithstanding the global and domestic shocks, the country continues to record positive economic growth, increase in foreign currency receipts, near-balanced budget as well as increasing capacity utilisation of the manufacturing sector. “The depreciation of the local currency and rising inflation, however, remain a challenge that Government has committed to tackle going forward. Inflationary pressures experienced during the first half of 2022 saw headline inflation steadily accelerating from 60.7% in January to 191.6% in June 2022. This has been driven partly by external factors which impacted negatively on import prices of raw materials, food and liquid fuels. Imported inflation contributed significantly to domestic inflation through cost push factors, whilst domestically, adverse inflationary pressures and exchange rate volatility were the main drivers of inflation.” He said in response, government has since introduced a raft of measures, meant to instil confidence, strengthen demand for local currency and foster market discipline to contain inflation. “Government is ready to implement further measures necessary in order to restore economic stability.” He said fiscal developments during the first half of the year, characterised by increasing revenues and expenditure pressures, have necessitated the revision of the approved 2022 National Budget. “The revision is necessary to allow spending agencies meet increasing costs of undertaking originally budgeted programmes and projects that will ensure the 2022 objectives are met. Revenue collections to year end are now projected at ZWL$1.7 trillion, while expenditures are now estimated at ZWL$1.9 trillion. This is against the approved Budget of ZWL$968.3 billion, entailing additional spending of ZWL$929 billion. Consistent with section 305(5) of the Constitution, the additional expenditures largely financed by expected additional revenues require approval of Parliament through a Supplementary Budget. “The bulk of the Supplementary Budget (53%) is going towards employment costs to cushion public servants against increasing cost of living. The balance of the additional resources are going towards meeting Government consumables (18%), capital projects (19%) and social benefits (7%). Government remains committed to addressing the welfare of civil servants in a fiscally sustainable manner. The challenges of yester-year where the wage bill crowded out other development expenditures should be avoided in order to create the right conditions for sustainable economic growth that will provide scope for payment of decent salaries to our hard-working workers. We are stepping up provision of non-monetary incentives to improve their welfare.” He also said the government has introduced an instrument that enables investors to store value in both local and foreign currency, through the gold coins minted by Fidelity Gold Refineries. “The gold coins are tradable, highly liquid and can be used as collateral security. Members of the public have been given an option to physically own them or to keep them in safe custody with their bankers. The price of the gold coins will be determined by the prevailing international price of gold.” He further noted that merchandise exports and imports increased by 33% and 15% to US$3 516.5 million and US$3 746.8 million, respectively, during the first half of 2022, compared to the same period in 2021. “To year end, exports are expected to reach US$7.3 billion, spurred by increases in mineral receipts benefiting from the mineral commodity price boom, as well as increases in agriculture and manufactured exports. Similarly, merchandise imports are also projected to reach US$8.1 billion driven by fuel, machinery and raw material imports. As a result, the country’s balance of payments remains favourable with a current surplus of US$387.1 million having been registered during the first half of 2022. The positive current account performance is envisaged to continue for the remainder of the year to close at US$366.3 million on the back of strong export performance and resilient remittance inflows.” The 2022 National Budget, said Ncube, was premised on revenue collections of ZWL$850.8 billion (16.8% of GDP), expenditures of ZWL$968.3 billion and a target budget deficit of ZWL$76.5 billion (1.5% of GDP). He said unaudited outturn during the first half indicates revenue collections of ZWL$506.6 billion, against expenditures of ZWL$534.5 billion, resulting in a budget deficit of ZWL$27.9 billion, against a target deficit of ZWL$45 billion. Ncube pointed out that as at end of June 2022, public and publicly guaranteed debt stood at ZWL$1.3 trillion and US$13.2 billion, comprised of domestic and external debt, respectively. “The country’s external debt continues to burden the economy by restricting access to low cost, long-term financing required to support the desired medium to long term growth trajectory. To address this challenge, Government has developed the Arrears Clearance, Debt Relief and Restructuring (ACDRR) Strategy aimed at restoring debt sustainability. In line with the ACDRR Strategy roadmap, Government will soon host a High-Level Debt Resolution Forum with Development Partners and other stakeholders aimed at building consensus among all stakeholders on the process and procedures of resolving the country’s external debt overhang and arrears clearance,” he said. Ncube said the African Development Bank’s President, Akinwumi Adesina has agreed to be the country’s champion for the debt resolution and re-engagement process. “In his capacity as champion, he will coordinate and chair the forthcoming High-Level Debt Resolution Forum.”