Hon. P.A. Chinamasa had to report about the current state of Fiscal and Economic Status in the Zimbabwean Parliament today. The report of his speech and numbers are not a wonderful picture. I have quoted the numbers that is most interesting.
The Agricultural and Mining shows how the different economic place the output is. Especially the loss of output and the yields of grain in the current year in Zimbabwe have been dire. The levels of debt, payments of the debt and the loans can be seen as “vicious cycle” from the Government and how they will act upon this. Let’s take a look at the numbers!
“Already, notable gains were registered in the gold sector during the first half of 2016, also benefitting from capacitation of small scale miners through the US$100 million mechanisation facility organised by Government and the Reserve Bank of Zimbabwe” (Chinamasa, P:12, 2016).
“Honourable Members will also be aware of recent initiatives by the Reserve Bank to ease tight liquidity constraints through promotion of plastic money, e-banking services, and broader use of multi-currencies, among other measures” (Chinamasa, P:13, 2016).
“During the first half of the year, Government introduced a US$500 million Special Maize Production Programme which targets utilisation of 400 000 hectares of land, with registration of interested qualifying farmers currently underway” (Chinamasa, P:16, 2016).
More on Grain:
“This year’s estimated maize grain harvest of 511 816 tons falls short of the normal national grain requirement of 2.2 million tons” (…) “Government interventions to provide for the national maize grain deficit of 1.7 million tons are being complemented by private sector and development partners’ imports” (Chinamasa, P:75, 2016).
Brazil food program:
“This complements such other facilities as the US$98 million More Food for Africa Programme supported by Brazil, under which farmers’ access, on a cost recovery basis, farm equipment and implements. This includes tractors, disc harrows, fertilizer spreaders, boom sprayers, among other equipment” (Chinamasa, P:16, 2016).
National Budget 2017:
“Government will take advantage of the forthcoming 2017 National Budget to propose some of the necessary measures to address any emerging gaps in order to remain on course towards the realisation of the further advancement of our Zim Asset agenda” (Chinamasa, P:18, 2016)
“the economy is facing strong headwinds, with major challenges being experienced in the economy and business activity during the first half of the year than what the 2016 National Budget anticipated” (Chinamasa, P:19, 2016).
Reasons for the struggling economy:
“Depressed international commodity prices, particularly for our minerals” (…) “Limited domestic and foreign direct investment, also associated with our debt overhang” (…) “The growing fiscal deficit, also impacting on the liquidity of the financial system, as well as on business activity” (…) “The resultant overall fall in incomes and weakening of domestic aggregate demand” (Chinamasa, P:18-19, 2016).
The Reversed projections of worrying numbers are -4.2% on Agricultural Output in 2016, the same with the Electricity and Water Output -21,8% and also the -5% Public Administration. Instead of scheduled GDP on 2.7; it’s projected instead to be 1.2; which is about the same as the 2015 numbers, but really shaved since 2013-2014 (4.5 and 3.8) – (Chinamasa, P: 19, 2016).
“Annual headline inflation remained negative, albeit accelerating from -2.19% in January 2016 to -1.4% in June 2016. The continued decline in prices in 2016 was driven by both food and non-food inflation, underpinned by the sustained depreciation of the South African rand; subdued international oil prices; and waning domestic demand” (…) “Annual food inflation, which averaged -4% over the period January to June 2016, was weighed down by declines in the prices of meat; bread and cereals, milk, cheese and eggs, oils and fats; and vegetables, among others, owing to improved supplies and competition from cheaper imports” (…) “Declines in prices of housing, water, electricity, gas and other fuels; furniture and household equipment; transport; clothing and footwear among others, however, continued to weigh down on non-food inflation” (Chinamasa, P:20, 2016).
“During the period January to June 2016, revenue under-performance against over-expenditures resulted in a cumulative budget deficit of about US$623.2 million, far above the full-year target of US$150 million”. By June the total revenue: $1.692.4 billion and the total expenses: $2.315.6 billion; which means the target by June 2016 is $623.2 million that is over $475 million deficit (Chinamasa, P:37, 2016).
“Failure to contain the budget deficit in the shortest possible time will worsen the deficit to an estimated year-end level of over US$1 billion” (Chinamasa, P:37, 2016)
“lack of capacity to service domestic debt has also seen roll-overs, which are posing some financial risks on domestic debt instrument holders and domestic financial institutions” (…) “This situation, unfortunately, is not tenable and is undermining the stability of the financial sector and overall economy” (…) “Government borrowing is also crowding out lending to the private sector and, hence, stifling new domestic investment and growth” (…) “This is creating a vicious cycle, whereby excessive Government borrowing leads to poor performance of the private sector and, in turn, diminished future tax revenues” (Chinamasa, P: 38, 2016).
“During the first six months of this year, pay dates of the public service, grant-aided institutions and pensioners have had to be periodically rescheduled from normal programmed pay dates as a result of resource constraints“ (…) “the staggering of 2015 bonus payments that stretched into July 2016 resulted in difficulties in paying the June salaries on time, thereby forcing Government to shift the pay dates into July” (…) “The Public Service pay dates cycles have since been modified by spreading payment of the monthly wage bill over six payment dates from the previous four payment dates” (Chinamasa, P: 39, 2016).
“The country faces a huge external debt overhang of around US$7.5 billion as at end of June 2016, with arrears accounting for almost 80% of the debt” (…) “the debt overhang is militating against the country’s efforts to mobilise reasonably priced long-term lines of credit” (…) “Clearance of arrears and unlocking of new financing will require that Zimbabwe builds capacity to honour old and new debt obligations to IFIs and other bilateral and new lenders” (Chinamasa, P: 40-41, 2016).
“Total external debt of Public Enterprises that has been guaranteed by the Government is estimated at USD$2 billion as at end June 2016. Public Enterprises are failing to service their debt and all the guarantees of US$2 billion have been called up” (…) “This has contributed to an increase of Government arrears by US$1.75 billion (25% of total external debt), further worsening the country’s low credit worthiness” (Chinasa, P:211, 2016).
“the banking sector was exposed to cash shortages, largely as a result of macro-economic challenges facing the country, including lack of fiscal space and the current account deficit” (Chinamasa, P:45, 2016).
“The still relatively high import level has also meant a high current account deficit, which is estimated at US$2.5 billion during the first half of the year, and constituting 12% of GDP” (Chinamasa, P: 67, 2016).
This numbers are showing how bad it really is, the debt and loans. The deficit of earning and the burden of the expenditure towards the fiscal revenue show the lacking fiscal responsible economy.
The fiscal deficit and the cash-strapped economy show the legitimate worry, together with the current monthly loans and debt. Not only adding debt when also having enough economy to pay the old debt. Together with issues gathering possible new loans as the Low Credit Worthiness.
The other is also the inflation of prices and such is a reaction towards the missing cash and debt burden. As also the problems of fiscal funding and creates more debt for the Republic of Zimbabwe.
I think the numbers speak for themselves. Don’t you think? Peace.
Hon. P.A. Chinamasa – ‘THE 2016 MID-YEAR FISCAL POLICY REVIEW STATEMENT “Improving Investor Confidence to Enhance Productivity” PRESENTED TO THE PARLIAMENT OF ZIMBABWE ON 8 SEPTEMBER, 2016 (08.09.2016)