The Sunday Mail
Senior Business Reporter
Finance and Economic Development Minister Professor Mthuli Ncube is targeting to achieve a 1,3 percent ($30 billion) National Budget deficit in 2021, a slight increase from the 0,5 percent anticipated for the year to December 2020, but still within acceptable regional thresholds.
The Treasury chief said this on Thursday while presenting the 2021 National Budget, which targets growth of 7,4 percent. This comes as the domestic economy is projected to contract 4,5 percent this year due to the devastating effects of the Covid-19 pandemic.
Minister Ncube recently shot down budgetary requests by different line ministries and departments for a $1,1 trillion 2021 National Budget due to inadequate revenue.
The $1,1 trillion requests under the 2021 National Budget, were proposed by different line ministries during a Parliament pre-budget seminar held in Harare before its presentation last Thursday.
Minister Ncube said keeping within budget guidelines was critical to ensure the Treasury is sufficiently resourced to execute public programmes while not contracting expensive debt.
Without adequate funding to finance the budget, Treasury would need to borrow at high interest rates, which would be payable by citizens in future in the form of high taxes.
Additionally, unnecessary Government borrowing has the effect of crowding out private sector, which weighs on the economy’s performance.
The targeted fiscal deficit is in line with the fiscal consolidation stance, which strictly limits the fiscal targeted deficit to below 2 percent of Gross Domestic Product (GDP) throughout the National Development Strategy (NDS1) period (2021 to 2025).
The Minister said total bids submitted to Treasury by various line ministries and departments were much higher than the capacity of anticipated revenues and borrowings.
“Therefore, given the macro-fiscal stabilisation objectives of the budget and the National Development Strategy 1, adhering to an expenditure ceiling of $421,6 billion becomes imperative,” he said.
Of the $421,6 billion National Budget, capital expenditures constitute $131,6 billion (5,5 percent of GDP), while recurrent expenditures are expected to consume $290 billion (12,1 percent of GDP).
Key allocations under the 2021 Budget include goods and services ($59,4 billion), employment costs ($142,6 billion), interest ($1,5 billion) and transfers ($86,5 billion), with the balance reserved for capital development programmes.
In line with the National Development Strategy 1, priorities and submissions from countrywide consultative engagements, the 2021 National Budget prioritises a number of key areas.
The 2021 Budget targets a fiscal deficit of 1,3 percent of GDP in line with the National Development Strategy’s fiscal consolidation objectives, which strictly limit the fiscal targeted deficit to below 2 percent of GDP.
The targeted budget deficit is within the SADC macroeconomic convergence threshold of below 3 percent of GDP threshold.
“To attain the above targets, fiscal policy will continue to prioritise revenue enhancement measures, while pursuing expenditure management thrust initiated from 2018 on the launch of the TSP,” Minister Ncube said.
Focus will fall on ensuring tight monetary policy, pursued through a three-pronged approach to achieving price and Zimbabwe dollar exchange rate stability.
The three-pronged approach focuses on exchange rate stability, financial sector stability and management of broad money supply growth.
Promotion of industrialisation and overall invigoration of domestic production through strengthening value chains, which utilise local raw materials, is a key tenet of the 2021 Budget and the NDS1.
Additionally, well-coordinated value chains between large businesses and micro, small and medium enterprises are necessary to achieve sector wide development and generate broader employment opportunities.
