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Monday, November 30, 2020

Budget Strategy Paper at a glance

  • The 2021 Budget Strategy Paper (BSP) constitutes a valuable tool, meant to guide consultative discussions and sharing of ideas on national priority policies, programmes and projects for the forthcoming 2021 National Budget.
  • Under the theme “Building Resilience and Economic Recovery Post COVID-19” the Budget Strategy Paper focusses on strengthening the economy to withstand any potential climatic (drought, cyclones, floods, pests) and macroeconomic shocks, as we focus on attaining inclusive and sustainable growth towards Vision 2030.
  • The targeted constituency include the Tripartite Negotiating Forum Partners comprising Government, Business and Labour as well as parliamentarians, private sector players, civic society organisations, academia, and all other interested parties/individuals inclusive of cooperating development partners.
  • In addition, the 2021 Budget Strategy Paper marks the transition from the Transitional Stabilisation Programme (TSP), coming to an end in December 2020, paving way for the longer term National Development Strategy: 2021-25, as the country ascends towards Vision 2030, for attaining a middle income status economy.
  • The 2021 BSP focuses on the broader agenda of consolidating gains made under the Transitional Stabilisation Programme and pushing necessary reforms and programmes under the National Development Strategy (2021-2025).
PillarKey Provisions
Pillar 1: Inclusive Growth and Macro-stabilityFiscal policy Monetary policy Stabilizing the National Currency and Prices Financial sector reforms Promoting inclusive growth Devolution
Pillar 2: Developing & supporting productive value chainsAgriculture Alternative technologies and traditional gainsSupport to vulnerable groupsMechanization Marketing Manufacturing        Job creation SMEs, Youth and WomenSports, Arts and Recreation
Pillar 3: Optimizing value of natural resourcesMining Mineral production:2018-2023Mines and Minerals Act AmendmentsMinerals Value Addition and BeneficiationMining cadastre system and capacitation Environmental sustainabilityInvestment and ExplorationOpening of closed and new minesMining TaxationSealing Leakages Tourism Tourism sector recoveryDomestic tourism promotionRegional tourism promotionDestination branding and image transformationDiaspora tourism promotionInternational tourism promotion
Pillar 4: Infrastructure, ICT and Digital EconomyInformation, Communication and Technology Housing, Urban Infrastructure and Renewal Transport Energy Water and Sanitation
Pillar 5: Human Capital Development and well-beingHealth Education Social protection
Pillar 6: Effective Institutions Building, Governance and PeacePeace and Security Alignment of laws to the constitution Property rights Social contract State Owned Enterprises Corruption Zimbabwe Investment and Development Agency Ease of doing business reforms
Pillar 7: Engagement and Re-engagementExternal arrears Diaspora Engagement

Ideological basis, critical assumptions, targets and priorities

  • Firming of gold prices
  • Better agric season
  • Re-vamped production of the manufacturing sector
  • Stable ZWL
  • Low inflation

Major economic risks and fiscal outlook

  • Corruption
  • Shrinking tax base
  • Country risk (re-engagement efforts)
  • Policy inconsistency related to the currency (affects foreign investors)
  • Climate-induced vulnerabilities
  • Covid -19 second wave
  • Global recession and that of trading partners

TSP review: Achievements and ambitions of the National Development Strategy

  • The TSP is guided by Vision 2030 (attaining middle income economy by 2030) yet evidence show that attaining medium income economy is insufficient in addressing inclusive growth (decent work, reduce poverty etc) – “jobless growth/without reducing poverty”. The BSP is also premised on Vision 2030 and is likely to follow in the footsteps of the TSP.
  • Missed GDP growth targets: 6.3% vs 3.4%; 9% vs -6.5%; 9.7% vs -10%
  • Missed Inflation targets: 2018: 4% vs 10.6%; 5% vs 255%; 5% vs 221%
  • Revenue targets missed: 22.3% vs 21.0; 22.2% vs 17.8%;
  • Successes: Expenses (% of GDP), Recurrent expenditures, and employment costs
  • Social protection: 0.25% (2019) – 0.7% (2020)
  • Public health spending: 7% (2019) -10.1% (2020) though still below 15% Abuja Declaration benchmark
  • Agric spending: 12.7% (2019) and 17.5% (2020) Vs 10% target (Maputo agreement)
  • Education: 14.6% and 13.3% vs 20% target (Education for All Initiative)
  • Industry capacity slumped from 48.2%, 36.4% to 27%!
  • FDI dropped from USD 717.1m (2018) to USD 259m (2019).
  • Economy still suffering from macro-economic instability (GDP, Inflation)
  • Poor institutional quality slow pace in implementing reforms (corruption continue to ravage the economy
  • Unemployment has increased under TSP (16.4% in 2019 vs 4.8% in 2014), youth unemployment at 26.8%.
  • Rural areas more poverty-afflicted (84.3% in 2011/12 vs 86% in 2017). Extreme poverty increased (22.5% in 2011/2 to 29.3% in 2017)

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