Zimbabwe economy to grow by 6.1 pct in 2014 – Chinamasa

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By the Source on December 19, 2013.

Zimbabwe’s economy is seen growing by 6.1 percent next year, rising to 6.4 in 2015 underpinned by ZimAsset, and recovery in agriculture, mining and construction, finance minister said as he presented a $4.4 billion national budget  on Thursday.

Inflation, is seen ending the year at 1.5 percent but the rate is seen much lower, after it fell  to 0.54 percent in November against projections of five percent this year due to falling economic activity which has seen industrial capacity utilisation drop to just over a third from 55 percent a year ago, according to the Confederation of Zimbabwe Industries (CZI).

Zimbabwe’s exports are seen reaching $5 billion in 2014, from $4.43 billion this year, but the import bill is projected to reach $8.3 billion next year, from $7.6 billion this year.

Public debt stands at $6.1 billion, excluding central bank debt and private sector debt, undermining Zimbabwe’s creditworthiness, Chinamasa said.

Zimbabwe expects to attract $518.3 million in aid from foreign donors in 2014, up from this year’s $259.1 million. Government will reengage with creditors to resolve debt and unlock monetary support.

The use of multiple foreign currencies, adopted in 2009 to replace a local unit ravaged by hyperinflation, will remain for the foreseeable future, Chinamasa said, quashing widespread speculation about the imminent return of the Zimbabwe dollar in light of the pervasive liquidity crunch in the economy.

Government expects to collect $4.4 billion in revenue in 2014, from the $3.8 billion in 2013. Current expenditure to account for $3.8 billion in 2014.

Chinamasa said there was a $130 million expenditure overrun to November.

In a bid to revive interbank lending, the government will next month introduce an interbank programme guaranteed by the Africa Import and Export Bank, (Afreximbank) which has put up $100 million.

Government will assume the central bank’s $1.35 billion debt and capitalise the central bank to the tune of $200 million to allow the bank to resume its role as a lender of last resort. Government will have capitalised the bank by March 31, 2014.

Chinamasa said the state would assume the RBZ’s debt through the issuance of five-year treasury bills attracting five percent interest annually. The paper will also have Tier 1 capital status, Chinamasa added.

He added that $20 million is required to repay Zimbabwe dollar accounts and that government will resolve the issue by December 31, 2014.

The finance minister proposed to securitise minerals to raise cash and proposed a geological survey of the country’s minerals.

Zimbabwe receives an estimated $1.6 billion in remittances from the Diaspora, Chinamasa said, and proposed a Diaspora bond to fund small hydro power projects. Government will also try to increase Diasporans’ participation in the indigenisation programme.

The indigenisation law, under which foreign-owned firms have been forced to sell majority stakes to local blacks will not be amended or diluted, Chinamasa said, adding that the confusion over its implementation was because ministers have not been speaking with one voice.

“The indigenisation laws are here to stay and there will be no amendment to dilute the law,” said Chinamasa, adding that Zimbabwe would insist on natural resources as its equity contribution in mining ventures for indigenization transactions.

Foreign investors for enterprises which do not derive from natural resources are free to choose own local partners, who would pay for equity.

The government will charge 15 percent royalties on gross diamond sales from 1 January. Zimbabwe has eight companies involved in diamond mining in the government-controlled Marange area, with the Government holding 50 percent stakes in seven through the Zimbabwe Mining Development Corporation, while it wholly owns the other. Chinamasa added that these mines would also pay an additional 2.5 percent resource depletion levy directly to Treasury, and not to the ZMDC as was the previous case.

Zimbabwe’s first ever diamond auction in Belgium ended on Monday, but the results are not yet available and earnings would be subject of a supplementary budget if necessary, Chinamasa said.

He proposed the use of close circuit television (cctv) in the entire diamond chain, from mining to selling to improve transparency.

Government will enforce compliance through the revenue authority and will impose penalties that may include withdrawal of licences, for failure to facilitate access by ZIMRA officers to the entire value chain, from production to the marketing of diamonds.

Zimbabwe is expected to churn out 16.9 million carats this year according to official statistics.

Government says two year window to build local refinery facilities end in 2014, after which exports of raw platinum will not be permitted and will impose a levy on such exports , he said without specifying the rate, applying more pressure on miners to build a refinery.

Download the full budget statement here