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Mid-term budget stakeholder consultations underway

by Staff Reporter
14 May 2021 at 08:26hrs | Views
TREASURY in the process of consultations on the upcoming mid-term fiscal review and the 2022 Budget Strategy paper (BSP) from key stakeholders.

The mid-term fiscal policy review statement will give an outline of how the economy has performed in the first half of year, and what - if any - additional measures need to be put in place.

Key budgetary targets that will be under review in the upcoming mid-term fiscal policy review statement is Finance and Economic Development Minister Mthuli Ncube's stated goal of preserving fiscal stability and other economic gains of the Second Republic with his ambitious spending programme expected to produce a small deficit of 1,3 percent of gross domestic product (GDP).

Overall measures announced in the 2021 National Budget are expected to drive Zimbabwe's GDP growth this year by 7,4 percent.

One of the most important stakeholders that contributes to overall economic performance is the insurance and pensions industry, which typically has the capacity to fund economic requirements.

In a circular dated May 7, 2021 Insurance and Pensions Commission (IPEC) Commissioner Dr Grace Muradzikwa, called for associations to coordinate the industry's inputs.

"The Ministry of Finance and Economic Development made a call for: the 2021 Mid-Term Budget and economic review; and the 2022 Budget Strategy paper (BSP) inputs. The Commission hereby request that you coordinate input from your members towards these policy papers for consolidation and onward submission to the Ministry," reads part of the circular.

"The 2021 Mid-Term Budget and Economic Review provides details on economic developments during the first half of the year, progress on budget implementation, and proposals for realigning policies and programmes to the 2021 Budget and National Development Strategy (NDS1) objectives.

"The Strategy paper aims to produce focused and well-thought-out Budget proposals that address our economic challenges in a way that is responsive to the industry's stakeholders needs. Presentation of the in line with Section 7 of the Public Finance Management Act [Chapter 22:19].

Critically the main fiscal measures in the 2021 National Budget were aimed at ensuring that the productive sectors had the support they require to lead economic expansion.

The insurance and pensions industry can play a key role in this respect, but they are yet to fully do so.

According to the 2021 National Budget, Zimbabwe has a growth ask of $116 billion, yet pension funds contributions as at December 2020 totalled $5,2 billion. SEF Prospero Capital managing director Francois Molife, has said both financial institutions and pensions funds can play a role in ensuring that the economy is funded internally.

"In Zimbabwe there is huge savings component, which is not accounted for. For instance, most residential properties are mortgage free, hence there are refinancing opportunities that can release billions in Zimbabwe dollars. There are a lot of savings in hard currency, a component of which is in households," he said.

"There has to be a strategy developed by formal institutions to convert the latent potential in current savings so that they can fund the economy's growth requirements." The insurance and pensions industry, in particular, has a lot of money tied up in property, which is illiquid.

So, there is a likelihood that players in the industry will push for additional measures to ease the setting up of real estate investments trust (REITs) on the United States dollar denominated Victoria Falls Stock Exchange (VFEX), among other initiatives.

Zimbabwe's overall GDP growth is expected to be mainly driven by growth in the following sectors: electricity and water (at 18,8 percent), agriculture and forestry (11,3 percent), mining (11 percent), and manufacturing (6,5 percent).

Source - Chronicle