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2019 Pre-Budget Strategy Paper [Download]

Towards a Prosperous & Empowered Upper Middle Income Society by 2030

TREASURY

INTRODUCTION

1. The 2019 Budget Strategy Paper (BSP) presents proposals on key polices and priorities, with a view of facilitating discussions and preparations of the 2019 National Budget and the Medium Term up to 2021.

2. The objective is to build consensus on interventions required under the forthcoming Budget, guided by the Vision 2030, which seeks to transform Zimbabwe into an Upper Middle Income status.

3. To facilitate the debate and assist in understanding the macro-fiscal situation, the BSP provides an update on both international and domestic economic developments during the first half of 2018 and outlook to year-end. Further, based on certain assumptions, mid-term macro and fiscal projections for 2019—2021 are provided.

4. Key challenges and risks in the outlook are also underlined in support of formulating appropriate macro and fiscal strategic objectives and targets.

5. This is followed by proposals on strategic and prioritised interventions for attaining the policy objectives and targets under the 2019 National Budget. 6 Macro-economic Challenges

6. Notwithstanding the positive growth trend of the economy since 2016, the growth trajectory faces a number fundamental risks which are related to the following: • Unsustainable high budget and current account deficits; • Foreign currency and cash shortages; • Emerging inflation pressures; • Low productivity and capacity utilisation; • Infrastructure deficiencies; and • Inadequate and low quality public service delivery.

7. At the centre of the above risks, is failure to live within means and hence the prevailing unsustainable high budget deficit, with destabilising implications not only to the financial sector but to the rest of the economy.

8. In particular, the financing of the deficit primarily through domestic borrowing with the use of instruments such as Treasury bills, overdraft with the Central Bank, arrears and loans from the private sector has turned unsustainable.

9. Such financing mechanisms are crowding out the private sector and hence constraining production. This is also increasing money supply 7 in the economy, translating into exchange rate misalignment and inflationary pressures now at 4.9%, as at August 2018.

10. Similarly, the high deficit has ignited expansion of domestic debt from US$275.8 million in 2012 to current levels of US$9.5 billion, against US$7.4 billion external debt. This brings total public debt to US$16.9 billion.

11. In the context of the above developments, macro-economic and fiscal stabilisation becomes critical and urgent and should invariably target the fiscal deficit. A stable macro-economic environment is an essential precondition for growth and increasing living standards for our people.

12. It allows individuals, businesses and the Government to plan more effectively for the future and also increases investment opportunities which in turn support and raise productivity. Transitional Stabilisation Programme: October 2018 – December 2020

13. The 2019 National Budget represents the first steps in the implementation of the Transitional Stabilisation Programme (TSP), focusing on stabilising the macro-economy and the financial sector, while at the same time removing investment bottlenecks. 8 14. Further, the Budget will identify quick-wins for stimulating exports and growth, setting the necessary foundation for longer term developmental thrust under future National Development Strategies: 2021—2025 and 2026-2030.

Downoad Full Document 2019 PRE BUDGET STRATEGY PAPER

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