Zimbabwe cuts 2016 growth forecast to 1.2 pct

Zimbabwe has revised down growth forecast for 2016 to 1.2 percent from the initial 2.7 percent due to under-performance of agriculture, the mainstay of the economy, Finance Minister Patrick Chinamasa said Thursday.

He also expressed grave concern at rising public sector wage bill, which accounted for 96.8 percent of total government revenue to June this year.

The finance minister was presenting the 2016 mid-term fiscal policy review statement in parliament.

Zimbabwe is operating in a tight fiscal space as state revenue has shrunk significantly in recent years due to company closures, downsizing and negligible foreign investment flows.

The falling revenue inflows have seen government in recent months failing to pay its workers on time.

Chinamasa told parliament that budget deficit had already exceeded target in the first half of the year at 623 million U.S. dollars, and warned that if not contained, the deficit could rise above 1 billion dollars for the whole year.

Chinamasa said exports during the first half of 2016 went down nine percent to 1.1 billion dollars compared to the same period last year, while Diaspora remittances were 15 percent down to 387.9 million from 457.8 million dollars last year.

Revenue collection in the first half under-performed by nine percent while for the whole of 2016 revenue was projected at 3.75 billion dollars, down 2.5 percent from the target of 3.85 billion dollars, he said.

He said Zimbabwe would maintain the multi-currency system introduced in 2009 until such a time when economic fundamentals are strong enough to support a local currency.

Zimbabwe ditched its hyperinflation ravaged currency in favor of a basket of multi currencies in 2009 that include the U.S. dollar, British Pound, Euro, Chinese Yuan, Japanese Yen and South African Rand.

The central bank has since announced plans to introduce local bond notes in October to stem cash shortages that began early this year.

The minister said Zimbabwe, which has an external debt of 7.5 billion with 80 percent being arrears, was ratcheting up re-engagement with multilateral creditors, including the International Monetary Fund, World Bank and African Development Bank to clear the arrears and help unlock fresh funding from the financiers to revive the ailing economy. Enditem