Harare – Zimbabwe’s cash strapped and investment starved economy will grow by 2.7% in 2016 after sagging to 1.5% this year, Finance Minister Patrick Chinamasa said on Thursday, highlighting that recurrent capital expenditure was eating into infrastructure investment requirements.
Zimbabwe witnessed negative growth in its crucial mining and agriculture sectors but received some respite from construction and tourism this year. In 2016, said Chinamasa, all sectors are expected to grow by between 1.3% and 4%.
The mineral rich but financially struggling southern African country is still saddled with debt and arrears amounting to $8bn although the government has started a re-engagement process with the international community to settle its arrears. This would enable it to access fresh funding.
“The 2015 budget remained under pressure. In the nine months to September, there was a $527m budget deficit that was funded through domestic borrowing,” Chinamasa said presenting the 2016 budget statement before parliament.
The presentation was attended by President Robert Mugabe and his two deputies. Mugabe arrived around 15:00 and had close security details around him as he emerged from his official limousine.
Chinamasa tabled a $4bn budget for 2016 against expected government revenues of $3.8bn, saying the deficit will be funded from domestic borrowing. He admitted that this was “crowding out” investment.
About $3.86bn of this will be spent on recurring government expenditure. He cautioned that the government would intensify tax audits to address tax avoidance, smuggling and zero rated items that were depriving the government of much needed revenue.
Zimbabwe is heavily reliant on commodities, but has been facing an economic slowdown from persistently lower commodity prices. Chinamasa said this had necessitated the need for diversification of the economy, especially with experts warning that mineral prices for platinum, nickel and chrome are likely to remain depressed.
“Inflation has remained low and the negative inflation levels are expected to continue in 2016. The decelerating inflation is a result of weak aggregate demand, price correction and liquidity constraints.”
Chinamasa said his budget would seek to address the country’s high import bill but welcomed falling oil prices on global markets. He revealed that about 23% of the country’s import bill was constituted of diesel and petrol imports.
Major exports for the country include mineral commodities while it imports the majority of finished and consumable products although the government had recently moved in to address this through higher duties and prohibitions on imports of poultry products, cooking oil and other goods.