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Roundup: Zimbabwe economy expected to grow by 4.5 pct in 2018: finance minister

Xinhua,December 08, 2017 Adjust font size:

HARARE, Dec. 7 (Xinhua) -- Finance Minister Patrick Chinamasa said Thursday Zimbabwe's economy is projected to grow by 4.5 percent in 2018, up from 3.7 percent in 2017 driven by strong performance in agriculture, mining and energy.

Presenting the first post-Mugabe national budget in Parliament, Chinamasa announced a 5.1 billion U.S. dollars national budget for 2018, up from 4 billion dollars in 2017.

He said total expenditure for 2018 was projected at 5.8 billion dollars, giving a budget deficit of 672.3 million dollars which constitutes 3.5 percent of Gross Domestic Product.

This is markedly down from the 2017 budget deficit of 1.7 billion dollars, constituting 9.4 percent of GDP.

Chinamasa said the budget, which proposes massive job cuts in the public sector and major economic reforms, will usher in a new economic order that propels growth and development.

The minister said overally, measures contained in the 2018 budget were aimed at restoring market and investor confidence, ensuring discipline in management of public finances and ensuring policy consistency, clarity, credibility and predictability.

The measures were also aimed at addressing current cash and foreign currency shortages in the economy, he said.

Among the major reforms proposed in the budget to attract foreign direct investment is the amendment of the indigenization and economic empowerment law promulgated during former President Robert Mugabe's government.

The finance minister said the controversial law will be reviewed such that the 51-49 percent threshold will only apply to two minerals - platinum and diamond -while the rest of the minerals will be exempted from the law.

This means that foreign investors in the platinum and diamond mining sector will be required to cede 51 percent shareholding to locals.

"The 51-49 (percent) threshold will not apply to the rest of the extractive sector nor will it apply to other sectors of the economy which will be open to any investor regardless of nationality," Chinamasa said.

There will be sectors reserved for locals and foreigners will only participate in these sectors through special dispensation granted by government, the minister said.

The review of the law is set to ignite foreign investor confidence in the economy and boost foreign investment inflows that are critically needed to jump start the economy and arrest massive unemployment in the country.

Chinamasa's budget made bold statements about government's unequivocal desire to cut government expenditure and address the challenge of unsustainable budget deficit which he said is affecting macro-economic stability.

He said government intends to cut its wage bill from the current 86 percent of total revenue to 70 percent in 2018 through retiring civil servants above the age of 65 years, laying off 3,800 redundant youth officers and maintaining a freeze on recruitment of non-critical staff, among other measures.

Government will also downsize its 46 diplomatic missions abroad to contain expenditure as it was currently struggling to clear arrears amounting to 17.3 million dollars, the minister said.

The minister said government will close non-strategic technically insolvent state-owned firms and commercialize strategic ones as it moves to reform the enterprises that have been a drain on the fiscus for a long time.

"It is now the time for action under the new economic order for implementation of the long overdue parastatal and enterprise reforms," Chinamasa said.

He said the government will strengthen agencies mandated with fighting corruption and make the fines more prohibitive as part of measures to fight the scourge.

Zimbabwe, the minister said, will intensify and accelerate its re-engagement with the United Kingdom, United States and the European Union to open doors for international cooperation.

In addition, government will double efforts to re-engage with the World Bank, International Monetary Fund, the European Investment Bank and all bilateral creditors to unlock funding for economic development, Chinamasa said.

"The country has for a long time experienced low productivity. Government will seek to attract both domestic and international investment through implementing investor friendly policies," he said.

The minister allocated 132.2 million for the holding of elections in 2018 which he said must be credible "for restoration of confidence in our economy".

As part of measures to boost productivity, the minister proposed a raft of tax incentives for agriculture, industry and tourism sectors.

He also proposed an export tax of five percent on gross value of exported lithium and further deferred tax on unrefined platinum exports to 2019.

He said inflation was expected to end 2017 at around 3 percent. He promised that government would pay its workers their 2017 bonuses but would stagger them due to current liquidity challenges in the economy. Enditem