10 November 2017

Zimbabwe: 2018 Budget to Focus On Fiscal Consolidation . . . As Deficit Is Set to Rise to $1,8 Billion in December

Finace and Economic Development Minister Dr Ignatius Chombo says the 2017 national budget deficit could rise to $1,82 billion from $400 million largely driven by the cumulative expenditures that are set to close the year at $5,6 billion. Speaking yesterday during the 2018 Parliamentary pre-budget seminar presently underway here, Dr Chombo stressed the need for fiscal discipline saying the budget deficit was largely financed through Treasury Bills and recourse to overdraft at the Reserve Bank.

"In the outlook to December, cumulative expenditures are projected to reach $5,582 billion, up from the budgeted $4,1 billion. This would raise the budget deficit for the full year from $400 million to $1,82 billion," he told delegates.

The minister said the increase in budget deficit was not sustainable and undesirable. Despite the envisaged increase in Zimbabwe's budget deficit by year end, he said 2018 overall economic growth was anticipated to grow by average three percent, supported by key sectors of agriculture, mining, construction, tourism, Information Communication Technology, as well as services.

"Inflationary pressures, however, threaten to increase to about 2,5 percent in 2018, with further inflationary pressures expected in the medium term," said the minister.

In line with Gross Domestic Product (GDP) growth, exports were anticipated to increase to $4,6 billion and imports to $7 billion. Dr Chombo said consequently, in line with economic growth projections, revenues were projected at $4 billion comprising tax revenue amounting to $3,763 billion. The above revenues will be complemented by inflows under Retention Funds, projected to raise $293 million.

"As part of strengthening accountability and transparency over public resources, Treasury from the 2018 Budget, will require that all Revenue Retention Funds are appropriated by Parliament, and accounted for through the Public Financial Management System (PFMS) and integrated into the Budget documentation," he said.

The 2018 national budget, Dr Chombo added, would strengthen fiscal discipline and improve the credibility of the fiscal statement through adherence to anchors such as limiting borrowing from the Reserve Bank as well as reducing Government debt to GDP ratio.

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