ZIMBABWE recorded a budget surplus amounting to $9,8 billion in the first quarter of 2021 on the back of continued fiscal consolidation measures and sustained macro-economic stability, Finance and Economic Development Minister Professor Mthuli Ncube has said.
Riding on the successes of the two-year Transitional Stabilisation Programme (TSP) that ended in December 2020, Government has managed to restore macro-economic stability amid growing domestic market confidence.
The reforms, coupled with adoption of digitisation, have also enhanced domestic revenue collection with the Zimbabwe Revenue Authority’s first quarter collections clocking $90,62 billion, which was 4,73 percent ahead of the targeted $86,52 billion.
The achievements attained so far have laid a solid foundation for the implementation of the National Development Strategy 1 (NDS1), a five-year economic development plan to anchor the country between now and 2025.
The blueprint sets the tone towards the ultimate achievement of an upper middle-income economy by 2030 with projections indicating the economy could grow by about 7,4 percent this year alone.
In a latest Treasury report for the first quarter ended March 2021, Prof Ncube says the success of stabilisation reforms is further being evidenced by the significant drop in annual inflation.
“On the fiscal front, a budget surplus of $9,8 billion was recorded as Government continued fiscal consolidation for ensuring stability and restore market confidence,” he said.
“Success of stabilisation reforms is also being evidenced through significant drop in the annual inflation rate to 240,6 percent by March 2021 from 837,5 percent in July 2020.
“Similarly, the exchange rate has stabilised at around US$1: $84 throughout the quarter.”
In June last year, the monetary authorities introduced the weekly Foreign Currency Auction Trading System, replacing a fixed exchange rate of US$1: $25. The intervention has improved access to foreign currency to companies in the productive sector and has thwarted financial market distortions that existed at the time.
To date, over US$1,3 billion has been traded on the platform. Prof Ncube said the first quarter has marked the beginning of NDS1 implementation —through the 2021 National Budget.
The $421,6 billion National Budget is anchored on building resilience towards sustainable economic recovery and growth through increasing focus on strategic priorities.
“The good rains received during the 2020/21 season herald better economic prospects for the year and the Crop and Livestock Assessment Reports are indicating a 23 percent increase in area planted under summer crops with expectations for higher output in 2021,” said the minister.
“However, there was a drop in the area planted for finger millet and rice as farmers shifted focus towards the production of high yielding crops such as maize and sorghum, in view of an anticipated good rainfall season.”
Cereal output for the 2020/21 agriculture season is expected to be higher compared to the previous farming season and this is expected to reduce pressure on grain imports.
The Second Round of Crop and Livestock Assessment report for 2020/2021 already estimates maize production at 2,7 tonnes, reflecting a 199 percent increase from 907 528 tonnes in the 2019/2020 season.
Regarding tobacco, which is one of Zimbabwe’s major foreign currency earners, Prof Ncube said area planted increased by seven percent to 125 177 hectares compared to 117 049ha, reflecting positive expectations in prices and good rains.
“Average prices are projected around US$2,70 against US$2,50 of the previous season,” he said.
During the quarter under review, Prof Ncube said the national cattle herd increased from 5,4 million last year to 5,5 million. Similarly, sheep numbers are expected to increase from 547 696 in 2020 to 697 910 this year while goats are projected to increase to four million from 3,9 million this year.
The minister said the good 2020/2021 rainfall season improved grazing and water conditions throughout the country. Dipping also improved during the period under review as the Government intervened through availing tick grease to farmers for free.
However, milk production has remained subdued, dropping from both the previous year’s first quarter and fourth quarter production of 19,2 million litres and 19,6 million litres, respectively, to 17,8 million litres, said Prof Ncube. The trend is partly attributed to the challenges of high costs of vaccines and other costs of production.
This was compounded by a shortage of good quality breeding cows and heifers on the market.
During the period, the mining sector’s performance was mixed while on one hand, firm international prices and resuscitation of closed mines improved the performance of the local sector, said the minister.