2024 Mid-Term Budget Review: Stability and Growth through Zimbabwe Gold Currency
In a significant presentation to the nation, the Minister of Finance, Prof Mthuli Ncube, delivered the 2024 Mid-Term Budgetary Statement today, emphasizing the theme of “Consolidating Economic Transformation.” The statement comes at a time when Zimbabwe is experiencing a relatively stable economic environment, a notable improvement following the introduction of the Zimbabwe Gold (ZiG) currency in April 2024.
Economic Stability and Inflation Control
Since the introduction of ZiG, Zimbabwe's economic landscape has seen marked stability. The prices of basic commodities have remained stagnant, bringing much-needed relief to consumers. Moreover, the rampant inflation that once plagued the economy has been constrained, contributing to a more predictable and stable economic environment. Prof Ncube highlighted that the ZiG month-on-month inflation remained stable at 0% in June, a significant improvement from -2.4% in May 2024.
Domestic Economic Developments
The domestic economy is now projected to grow by 2% in 2024, down from the initial National Budget projection of 3.5%. This downward revision is mainly attributed to the more severe-than-expected impact of the El-Nino-induced drought on agricultural output. However, there is upside potential, with winter wheat output expected to reduce the contraction in the agriculture sector, ultimately improving the overall GDP outcome for this year.
Financial Sector and Monetary Developments
The banking sector remains robust, with all institutions adequately capitalized and maintaining low non-performing loan ratios. The stock of reserve money stood at ZiG6.6 billion in May 2024, reflecting a stable monetary environment. The stock market has also shown growth, with the Zimbabwe Stock Exchange (ZSE) market capitalization increasing by 35% from ZiG25.6 billion in April to ZiG38.7 billion in June 2024.
Public Finance Developments
The 2024 National Budget, initially formulated using the Zimbabwe dollar, has been reconfigured to reflect the new ZiG currency. The approved expenditure for the 2024 Budget is ZiG87.9 billion, with revenue collections amounting to ZiG36.5 billion against expenditures of ZiG38.9 billion in the first six months of the year.
Infrastructure and Social Services
Significant progress has been made in major infrastructure projects, including the Harare-Beitbridge highway upgrade and Mbudzi Interchange construction. In the first half of 2024, ZiG4.2 billion was disbursed towards transport infrastructure projects. Additionally, resources amounting to ZiG6.7 billion were allocated to education, ZiG2.5 billion to health, and ZiG243 million to social protection programs, reflecting the government's commitment to human capital development and social welfare.
Currency Reforms and Fiscal Measures
To ensure the stability of the ZiG currency, the government has introduced several measures, including a Reserve Accumulation Strategy and fiscal consolidation measures. Taxes and user fees for government services will now be payable exclusively in ZiG, promoting the use of the local currency.
Outlook to Year-End
The fiscal policy thrust and macro-fiscal framework of the approved 2024 National Budget remain unchanged. However, priority areas may shift to address the impact of the drought on food security and water availability. Revenue projections to year-end are ZiG93.2 billion, with expenditures of ZiG96.8 billion, resulting in a deficit of ZiG5.6 billion.
Prof Ncube emphasized that the stability brought by the new currency provides further impetus to the economic transformation process, which aims to broaden the range of locally produced goods and facilitate the production of high-value and complex products, making the economy more resilient to global and domestic shocks.
As Zimbabwe navigates through these economic reforms, the commitment to consolidating economic transformation remains steadfast, with the cooperation of all stakeholders essential to achieving the objectives of Vision 2030.