Professional Documents
Culture Documents
MINISTER OF FINANCE
1. INTRODUCTION
1.1.1.This Report gives a preliminary update on economic and fiscal developments for the month of March 2013. 1.1.2.Critical are the additional unbudgeted for pressures on the 2013 Budget and the implications on funding arrangements. 1.1.3.The March Report also provides highlights of the Budget financial support towards the Constitution Referendum held on the 16th March. 1.1.4.The Report also indicates funding requirements for the conduct of harmonised General Elections, following the conclusion of the New Constitution making process, in line with the provisions of the Global Political Agreement. 1.1.5.Following Cabinet approval of the Zimbabwe Accelerated Arrears Clearance Debt and Development Strategy (ZAADDS) in November 2011, progress with the implementation of both ZAADDS and the Zimbabwe Accelerated Re-engagement Economic Programme (ZAREP) is highlighted.
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2.
2.1.
Highlights
2.1.1.During the first quarter of 2013, while the macro-economic environment remained stable as reflected by low inflation levels, the economy, however, exhibits a number of fundamental weaknesses which may impact on the 2013 projected growth target of 5%. 2.1.2.These weaknesses are reflected through liquidity and financing challenges, limited revenue growth, as well as a widening trade and current account gap, emanating from depressed exports and over-dependence on imports. 2.1.3.As a result, capacity utilisation of most productive sectors remains well below potential, dampening prospects for fast economic recovery. 2.1.4.On the prices side, inflation was contained below 3% during the months of January and February 2013, recording 2.5% and 2.98%, respectively. This largely reflected depressed demand due to liquidity challenges, as well as a depreciated South African rand, which gave relief to importers. 2.1.5.With regards to key productive sectors, mining output in January and February, particularly for platinum, coal, nickel and chrome was on the increase and within production targets in line with the 2013 Budget Macro-economic Framework.
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2.1.6.In agriculture, cumulative tobacco deliveries as at 22 March 2013 reached 34.1 million kgs, valued at US$126.5 million. The average price was about US$3.71 per kg, compared to US$3.69 last year. 2.1.7.However, performance of other crops is being threatened by early departure of rains. The actual extent will be ascertained in the forthcoming First Crop Assessment Survey. 2.1.8.The performance of public finances, however, remains under pressure from huge inescapable expenditure demands against limited revenue earnings. Revenue collections, which underperformed in January at US$254.5 million against a target of US$273.6 million, improved during February, with collections of US$269.5 million. 2.1.9.By 28 March 2013, revenue collections were US$241 million against the monthly target of US$301 million, which entails raising US$60 million within the last days of the month in order to meet the monthly target. 2.1.10. The external sector also continued to face a mounting trade and current account deficit, amid negligible capital inflows, that way exerting pressure on the balance of payments position. 2.1.11. As at 15 March 2013, monthly exports stood at US$196 million, while cumulative exports since January amounted to US$689 million.
2.1.12. On the other hand, imports, during the first half of March stood at US$294 million, while cumulative imports since January stood at US$1 739 million. This translates into a trade gap of more than US$1 billion within the first quarter of 2013.
245.3
258.8
235
286
739.1
780.2
9.2 225.6
10.7 324.6
6.0 221.9
15.9
25.9
45..2
O/ W diamonds
Total Expenditure Inc Retained Zimra Grant Current Expenditure
5
252.1
5
772.1
15.0
775.6
220.5
288.1
206.6
235.1
715.2
726.8
123.1
206.8
155.3
210.0
485.2
495.0
Capital Expenditure
5.1
36.1
6.3
17.0
47.5
44.4
Expenditures
2.2.5.Total expenditures as at 22 March 2013 amounted to US$221.9 million against the monthly target of US$252.1 million. capital expenditure accounted for US$6.3 million. 2.2.6.Employment costs, at US$155.3 million, accounted for 75.4% of total recurrent expenditures as at 22 March 2013. 2.2.7.Disbursements for capital development projects were US$8.1 million, while actual expenditures stood at US$6.3 million for the month of March. Of this amount, recurrent expenditure was at US$206 million, while
channeled towards payment of outstanding certificates for work done in 2012 and other critical projects. 2.3.3.The Table below indicates the breakdown of capital disbursements for the past three months.
Sector Energy Transport & Communication Water & Sanitation Housing ICT Health Education Social Services Agriculture Furniture & Equipment Vehicles Other Grand Total Original Budget $ 18,000,000 61,400,000 97,225,000 66,073,000 27,210,000 129,600,000 53,290,000 550,000 52,350,000 8,236,000 5,211,000 45,855,000 565,000,000 January $ 1,300,000 3,000,000 175,000 1,051,000 2,620,000 8,146,000 February $ 2,500,000 11,500,000 1,315,000 2,135,000 1,560,000 13,450,404 596,279 2,205,000 35,261,683 4,675,000 8,175,000 March $ 600,000 1,100,000 200,000 1,500,000 100,000 Total $ 3,800,000 14,500,000 2,090,000 1,100,000 3,386,000 5,680,000 13,550,404 596,279 6,880,000 51,582,683
Ruwa Bridge
2.3.7.The Mutare abutment and the middle pier are complete. The
preparation for pouring of concrete. Work has also started on the decks.
Ruwa Bridge
Manyame Bridge
2.3.8.The super structure is complete. Remaining works include the
guard and hand rails, crash barriers, approach slab and sealants. Other works to be completed are bridge approaches, surfacing and bridge protection works which will be undertaken by the Department of Roads.
2.4.2.Materials on site include stones and bitumen. Works are yet to resume as the contractor awaits payment of outstanding certificates. 2.4.3.Laying of the sewer pipes and construction of the pump house are complete. Outstanding works include; connections to the municipal sewer mainline and installation of pumps.
JM Nkomo Airport
2.4.4.The airport terminal building is complete. What remains is
specialist equipment i.e. Common User Terminal Equipment (CUTE) and Flight Information Display System (FIDS) which should be bought by CAAZ.
Mtshabezi Pipeline
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2.5.3.Laying of the 42 km pipeline was completed. Currently, ZINWA is using temporary generator power to pump water to the City of Bulawayo at a rate of 610 m3/hr. 2.5.4.The overhead power line is complete. transformer. 2.5.5.The project is expected to be complete by 24 April 2013. Outstanding work is the
Tokwe Murkosi
2.5.6.Major activities being carried out include rock fill of the dam wall and concrete lining of spillway and outlet channels. fifth saddle dam. Four (4) saddle dams are complete and works are now concentrated on the
Wenimbi Pipeline
2.5.7.All the major works for the Wenimbi Pipeline are now complete. These include laying of a 20 km pipeline, installation of pump sets, erection of the power line and electrification of the pump house and booster stations. 2.5.8.Outstanding works include installation of electricity meters and energising of the pumps. An amount of US$137 000 is required to access electricity from a private line to the project.
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Chinhoyi Municipality
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2.5.12. The works include the rehabilitation of two sewer treatment plants and three pump stations. 2.5.13. To date sewer ponds have been dislodged. However, the
contractors have since moved offsite leaving fabrication of biofilters, electrical works and installation of pump sets works incomplete.
Pump Sets
2.6. Health
2.6.1.With regards to the Health sector, a total of US$3.4 million was disbursed. From this amount, US$0.87 million went towards the procurement of diagnostic CT scanner for Parirenyatwa Hospital, US$1.2 million went towards revitalisation of district and provincial hospitals and US$1.3 million channeled towards construction and upgrading of other health facilities.
Chinhoyi Hospital
2.6.2.The institution benefited from the Targeted Approach and has managed to procure two service vehicles, three ambulances, X-ray film processor, rehabilitation equipment, linen and furniture.
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Other works that were undertaken include rehabilitation of the steam reticulation system and cold rooms.
Bindura Hospital
2.6.3.From the resources availed under the targeted approach, the hospital managed to redecorate its buildings, drill two boreholes, procure medical, laundry and kitchen equipment as well as a service vehicle and an ambulance. 2.6.4.The water and sewer reticulation system was also rehabilitated. Works in progress include rehabilitation of the 2 existing boilers.
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Mahusekwa Hospital
2.6.5.The hospital was constructed and equipped under a Chinese facility. 2.6.6.Government of Zimbabwe is constructing staff houses and upgrading the electricity, water and sewer reticulation. 2.6.7.To date five out of eleven E21 houses are almost complete. Outstanding works include wall and floor tiling, carpentry, plumbing and painting.
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2.7. Education
2.7.1.The education sector received resources amounting to US$5.7 million, with US$2.5 million going towards rehabilitation of schools and US$3.2 million going towards outstanding certificates at State Universities.
Bindura University
2.7.2.The Faculty of Science Block I is almost complete. Outstanding works include electrification and civil works. 2.7.3.The handover is scheduled for end of March 2013 and this will create more teaching space.
University of Zimbabwe
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2.7.4.Rehabilitation of the Students Union building, water and sewer reticulation systems in the Halls of Residences and equipping of the Geography Department is complete. 2.7.5.Central Kitchen and Dining Hall reconstruction is in progress. Outstanding works include completion of the B.Ed Block, and rehabilitation of New Complex 5 and Manfred Hodson Hall.
Central Dining
2.7.6.The institution continues to face water challenges. 2.7.7.In order to alleviate this problem, construction of a dedicated water pipeline linking Avondale Pump Station to the University is underway. All the pipes have already been procured.
Chinhoyi University
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The
building is at slab level with columns having been erected. Walls to the offices are at window sill level. The remaining works can be finished by July 2013 as most of the materials for the remaining works are on site.
2.7.9.The superstructure of the engineering block and electrical tubing is complete. Roofing is 90% complete for the superstructure whilst the substation is at roof level.
Halls of Residence
2.7.10. At Bindura University, the female block is at the last deck (2nd floor). The male block is at foundation level and the concrete pillars have been poured. The wardens house is at window
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level. The contractor is on site and works are expected to be completed within six months.
2.7.11. Midlands State University hostel is at 2nd floor deck for the female block whilst the male block is at excavation stage. The wardens house is at roof level.
2.8. Housing
2.8.1.Support towards housing development during the first quarter amounted to US$2.1 million.
Central Registry
2.8.2.All major works have been completed from the fourth to the ninth floor on blocks 2A & B and 3 which will house the Registrar Generals offices, whilst works are currently underway from the
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basement to the third floor. Outstanding works include iron mongery, partitioning, switches, counters and floor tiling. 2.8.3.Block 1 and 4 will be occupied by the Immigration Department. Works on these blocks are lagging behind. Outstanding works include diamantine on walls, office partitioning, flooring, iron mongery, fitting of doors, counters, switches and painting among other works.
Mufakose Flats
2.8.4.The super structure of the two blocks is complete. Electrical
cabling and piping, plastering, glazing has been done for Block A. All the materials for the outstanding works are on site. 2.8.5.Outstanding works on Block A & B include external brick dressing, plastering and flooring of staircases and walkway, inside painting, fitting of built in cupboards, skirting, paving as well as car parks and landscaping.
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Dzivaresekwa Phase II
2.8.6.Pipe laying and manhole construction is complete for outfall sewer. Connection to the main line, however, is still outstanding. A total of 61 manholes have been completed and pipe laying for the sewer reticulation is complete for 4.336 km. Pipe laying for water reticulation covering 5.8 km has been completed. 2.8.7.In addition, 450m of storm water drainage have been excavated. Excavation of expansive soil has been done for 9.8 km of the road network. Sub grade compaction is complete for 2.8 km while base compaction, prime application as well as surfacing are still to commence.
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Merivale Flats
2.8.8.The first Block of flats is at the second deck whilst the second block is yet to commence. Materials on site include plumbing, electrical, as well as door and window frames. Outstanding works include completion of the superstructure for the block of flats, plastering, glazing, flooring, carpentry, electrical, plumbing works and civil works
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Tafara Flats
2.8.9.Superstructures for the first two blocks are complete while the third block is at second floor deck. Outstanding works for the first block include external brick dressing, plastering and flooring of the staircase, balustrades as well a few plumbing connections. 2.8.10. The second block requires glazing, skimming, plastering and flooring of the staircase, balustrades, external brick dressing and apron, built in cupboards as well as skirting and painting.
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2.8.11. An amount of US$13.6 million was availed towards the agricultural sector, of which US$11.5 million was for payment of obligations under the crop input support programmes and US$2 million for the capitalisation of Agribank.
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2.8.12. Other notable items supported include on-lending to SMEs (US$0.65 million) and compensation to farmers (US$0.5 million).
Source: TIMB
Food Security
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2.9.4.According to the Zimbabwe National Statistics Agency (ZIMSTAT), the country has to date imported 432 400 tons of maize to meet the cereal gap of 436 211 tons. 2.9.5.A total of 1.4 million people are currently receiving assistance through Government and humanitarian agencies. 2.9.6.Currently, Government is also negotiating with the Zambian Government for importation of 150 000 tons of maize valued at US$60-70 million, as part of the Grain Importation Programme. 2.9.7.The grain importation programme will be funded by both Government and private sector players, in view of the limited capacity of the fiscus.
Sugar
2.9.12. Sugar prices also declined as indicated by the FAO sugar Price Index which averaged 172.1 in January, indicating a fall of about 3.2 % from the January index of 177.9.
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Cereals
2.9.13. According to the FAO, the Cereal Price Index averaged 162.9 in February 2013, down by nearly 0.8 % from the January value of 164.2. The values of the monthly index have been falling since October 2012, mostly on improved crop conditions.
Monthly Real Food Price Indices (2002-2004=100)
Date 1/2012 2/2012 3/2012 4/2012 5/2012 6/2012 7/2012 8/2012 9/2012 10/2012 11/2012 12/2012 1/2013 2/2013 % Change from January Food Price Index 142.3 144.1 144.4 142.4 136.8 134.0 142.3 142.1 144.2 143.4 141.7 140.9 139.8 139.6 -0.1% Meat Price Index 116.5 119.1 119.0 120.1 117.0 113.3 111.5 114.0 116.9 118.5 118.9 120.0 118.0 118.0 0.0% Dairy Price Index 138.2 135.1 131.7 124.1 117.7 115.9 115.6 117.4 125.5 129.7 130.4 131.5 131.6 134.8 2.4% Cereals Price Index 148.9 151.3 152.3 149.3 147.9 148.5 173.9 173.8 175.5 173.4 170.8 167.2 164.2 162.9 -0.8% Oils Price Index 156.2 159.6 163.7 167.7 156.3 147.5 151.1 151.0 150.2 138.0 134.0 131.4 136.3 136.9 0.4% Sugar Price Index 223.5 228.8 228.6 216.6 196.9 194.1 216.8 198.0 189.6 192.7 183.5 183.2 177.9 172.1 -3.2%
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2.10. Mining
2.10.1. Mineral output increased for the month of February 2013, with platinum recording 1 219.61 kgs from 1 007.59 kgs in January 2013. Nickel output increased to 882.88 tons from 739.37 tons in January 2013, as indicated below.
Monthly Mineral Production Mineral Gold \kg Nickel \t Coal \t Asbestos \t Chrome \t Platinum \kg Palladium \kg Copper \t Rhodium \kg
Jan 2013 1,088.4431 739.37 161,716.00 160 9,223.00 1,007.59 767.75 599.43 87.81
Feb 2013 1,066.3810 882.88 169,622.00 11,142.00 1,219.61 422.63 702.63 103.38
Gold Production
2.10.2. Gold output for February 2013 was 1 066.38 kgs, slightly lower than 1 088.44kgs produced in January 2013. 2.10.3. The Table below indicates monthly gold production for the period January to February 2013. March figures are yet to be submitted.
Gold Output (kgs) Jan-13 Small scale producers Large Scale Producers Total 143.3994 945.0437 1 088.4431 Feb-13 150.4202 916.1390 1 066.5592 Total 293.8196 1 861.8196 2 154.8241
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2.11. Inflation
2.11.1. During the first quarter of 2013, the country continued to experience stable price levels as reflected by the annual inflation for January and February, which recorded annual inflation of 2.5% and 2.98% respectively. This was largely attributed to depressed demand due to liquidity constraints and depreciation of the rand which provides much relief to importers. 2.11.2. However, there was a surge in month on month inflation from 0.07% in January to 0.95% in February. Major price increases were recorded in the category of bread and cereals, clothing and footwear, rentals and hospital services.
2.11.3. Notwithstanding the marginal increase in both month on month and annual inflation for the month of February inflation in the
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outlook period will remain under control mainly due to depressed demand on the back drop of liquidity challenges.
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2.12.4. In the month of January 2013 the structure of the bank deposits was as follows; demand deposits (53.3%) followed by savings and short term deposits (22.4%) and long term deposits (15.3%).
Structure of Bank Deposits (US$ millions)
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2.12.6. The loan distribution was as follows: Agriculture (21%), Distribution (20%), Manufacturing (20%), Individuals (16%) and Mining sector (7%).
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Mineral Exports
2.14.4. As at 15 March 2013, mineral exports stood at US$473.6 million compared to US$510 million realised in the corresponding period in 2012, representing a 7% decrease. 2.14.5. Platinum dominated mineral exports with US$210 million, followed by gold (US$124 million), diamonds (US$113.7 million) and as indicated by the Table below.
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Mineral Exports Shipments: Jan - 2013 Mineral Platinum Gold Diamonds Other Total 2013 US$ m 210,145,375 124,118,953 113,715,602 25,611,468 473,591,397 2012 US$ m 177,407,311 122,378,435 180,559,465 39,607,906 519,953,117
Diamond Exports
2.14.6. The total diamond exports for the month amounted to US$113,7 million, of which Mbada Diamonds had the highest export shipments of US$ 44,7 million, followed by Anjin Investments with US$30,4 million, as shown by the Table below.
Diamond Exports: January -2013 Mining Company Mbada Diamond Marange Resources Murowa Diamonds Anjin Investments Diamond Mining Corporation DTZ-OzGeo River Ranch Total US$ 44,778,303 5,325,857 13,774,989 30,423,920 18,460,301 833,715 118,517 113,715,602
Imports
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2.14.7. As at 15 March 2013, monthly imports amounted to US$ 294 million, while cumulative imports stood at US$1,739 million. This represents a 14% increase from US$1 525 million recorded during the same period in 2012. 2.14.8. The Table below shows monthly imports.
Month January February March Total
Source: RBZ
3.
3.1.1.The under-performance of our Revenue, against the background of high Employment Costs, some critical external loan repayment obligations, the Referendum, Elections, and the unbudgeted for new requirements in support of Grain Importation all pose major pressures on the Budget.
3.2. 2012 Population Census
3.2.1.The above pressures come up at a time when the Budget is yet to fully dispense with all the financial obligations arising out of the August 2012 National Census.
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3.2.2.Treasury is, however, pleased to report that US$4.8 million in outstanding payments to Enumerators in Masvingo, Mashonaland West and Mashonaland East were cleared in March 2013. 3.2.3.This has reduced overall outstanding obligations to Enumerators to US$2.7 million, now only for personnel in Harare Province. 3.2.4.However, ZIMSTAT also has some US$6.3 million outstanding obligations with regards to payment to some of the catering service providers for the August 2012 Population Census programme which some Co-operating Partners had committed themselves to supporting. 3.2.5.ZIMSTAT is in discussion with both the UNFPA and Co-operating Partners to come up with a disbursement plan to liquidate these obligations.
3.3. Budget Support for the Referendum
3.2.1 Requirements
3.3.1.Submissions by the State organs overseeing the Constitutional Referendum had indicated requirements amounting to US$85 million. 3.3.2.This was against a 2013 Budget provision of US$25 million for both the holding of a Referendum and the conduct of Harmonised General Elections later in the year.
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3.3.3.In the absence of the financial support of cooperating partners in support of the Referendum, reliance on mobilisation of additional domestic financial resources became necessary. 3.3.4.The efforts to mobilise resources were complemented by institution of measures to rationalise and streamline the Referendum funding requirements.
cooperation of all stakeholders, including our Departments and personnel, who sacrificed to make the process a least cost success.
3.2.3 Disbursements
3.3.7.The breakdown of the initial US$31.5 million disbursement requirements for the Referendum was as follows: US$2 million to procure indelible ink, pay for printing of ballot paper and voter education pamphlets; US$2.5 million to cover some voter education costs; US$3.5 million for Referendum materials; US$3 million for vehicle hire;
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US$0.5 million for training; and US$20 million, of which US$5 million facilitated ZRP deployment.
3.3.8.With the support of all the involved stakeholders, Government was able to stagger some of the allowance payments, facilitating the disbursement of US$10 million on 19 March 2013. 3.3.9.This means that an amount of around US$11.5 million remains outstanding, and Treasury will be making the necessary disbursements in line with Budget revenue inflows.
our own means with regards to the Referendum necessitated institution of the following funding arrangements:
pension funds and insurance companies, Government issued 365 day Treasury Bills. 3.3.12. In this regard, Government appreciates the support of both
NSSA and Old Mutual who were able to take up US$20 million each at a negotiated coupon rate of 7%. This was in line with returns on their other investments in the market.
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3.3.13.
maturities related to the issuance of these Treasury Bills will be made as part of the 2014 Budget. 3.3.14. Government is cognisant of the crowding out effect of the
above market liquidity withdrawal and, hence, the inculcation of measures to proceed with caution and the support of industry and the financial market. 3.3.15. It is in this light that discussions over further Treasury Bill
issuances are being conducted, including with such stakeholders as Delta and others, under the auspices of CZI support to Government for hosting of National events.
tax payer with regards to supporting the Referendum also became unavoidable. 3.3.17. Hence, excise duty on diesel and petrol was reviewed
upwards from midnight of 9 March 2013 to the following levels for the period March-December 2013: Diesel, US$0.20 to US$0.25 per litre. Petrol, US$0.25 to US$0.30 per litre.
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3.4.1.I have alluded above to critical external loan repayments also exerting pressure on the 2013 Budget finances. 3.4.2.During the first quarter of 2013, Government has had to make US$76.5 million towards various external loan repayments, targeted at unlocking access to additional lines of credit.
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3.5.5.However, until revenues improve, stakeholders will appreciate that this can only be at the expense of displacing some budgeted expenditure programmes.
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3.7.2. The stock of arrears to service providers stood at US$146.6 million as at the end of December 2012. 3.7.3. This is choking the economy to the extent of creating a debt gridlock where each organisation or parastatal owes the other, resulting in a paralysis. 3.7.4. Government has already taken the position to avoid any further accumulation of arrears from 2013, with the strategy also targeting clearance of last years outstanding payment arrears. 3.7.5. Central to the containment of further arrears and timely settlement of due payments is the consumption of services in line with budgeted resources and timely billing and validation of bills between Service providers and Ministries. 3.7.6. In this regard, Treasury issued an administrative circular which seeks the support of Line Ministries and Service Providers in aligning the consumption of services to Budget provision and monthly cash flow targets. 3.7.7. Bills submitted to Government for services rendered during the month of January amounted to $4.2 million, with an amount of US$3.8 million having been paid by end of March 2013.
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3.8.1.The Budget pressures outlined above mean that there is a massive retrenchment of both our public sector investment and social expenditure. 3.8.2.In short, this poses a financial crisis which needs to be fully appreciated across Government. 3.8.3.There appears to be no overall appreciation at present among stakeholders over the extent of the financial crisis that the economy is facing and more importantly, there is no regard of the constrained Revenue the economy is generating. 3.8.4.On the contrary, there is a general desire and appetite to spend, oblivious to the financing challenges of such created expenditures.
requirements, we are faced with repayment obligations in terms of principal amounts and interest. 3.9.4.Domestic debt obligations are compounded by the rising payment arrears to service providers and capital projects unpaid certificates. 3.9.5.The challenge is that failure to contain excessive commitments of the Budget will only result in us running out of potential sources of borrowing.
3.10. Preparations for the Elections
3.10.1.
financial requirements for the harmonised Presidential and Parliamentary Elections are estimated at US$132 million. 3.10.2. The 2013 Budget provision of US$25 million was inadequate
even to cover the requirements for the Referendum. 3.10.3. will The large resource requirements for funding the Elections also necessitate that Government efforts to marshal
cooperating partner support through the United Nations be a complement to further domestic measures to raise resources earmarked towards supporting this National Programme. 3.10.4. The level of financial resources from any additional domestic
measures we might institute will be nowhere near enough to provide fully for the requirements of the harmonised Presidential and Parliamentary elections.
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3.10.5.
Election programme, recourse to Co-operating Partners support will be necessary. 3.10.6. In this regard, Government continues to work with
cooperating partners for financial support through the United Nations (UN) process, with the UN Needs Assessment Mission awaited. 3.10.7. I am, therefore, grateful for the support and guidance of the
4.1.1.Cabinet approved the Zimbabwe Accelerated Arrears Clearance and Debt Development Strategy (ZAADDS) with the following key tenets in November 2011: Establishment and operationalisation of a Debt Management Office; Undertaking a validation and reconciliation exercise of the external debt data-base; Re-engagement community; Negotiating for arrears clearance, new financing and comprehensive debt relief; and Leveraging Zimbabwes natural resources in pursuit of debt relief and development.
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with
creditors
and
the
international
4.1.2.Government has remained committed to the implementation of ZAADDS through the Zimbabwe Accelerate Re-engagement Economic Programme (ZAREP). 4.1.3.This programme is meant to facilitate accelerated re-engagement with the International Financial Institutions (IFIs) on policy issues. It is an important stepping stone towards negotiations for Arrears Clearance, Debt Relief and new financing from the international community, including the International Financial Institutions (IFIs). 4.1.4.Significant progress has been made in implementing ZAADDS, with the Debt Management Office now fully operational. Updating of the external debt data-base is on-going with over 90 per cent of the data-base now validated and reconciled with creditors. 4.1.5.The re-engagement with creditors and International Financial Institutions (IFIs) has progressed well. As reported in my February 2013 State of the Economy Report, we had an IMF Mission from 25 February 1 March 2013. 4.1.6.During the IMF Mission, we held discussions and consultations on the consolidated key ZAREP Economic and Financial Policies and Targets. 4.1.7.These economic and financial policies are guided by the 2013 National Budget which was presented to Parliament in November 2012, and the Zimbabwe Medium Term Plan (MTP) 2011 to 2015. These policies are aimed at unleashing Zimbabwes economic growth potential.
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4.1.8.Sustainable and inclusive growth will be achieved by the implementation of sound and credible economic and financial policies. This will accelerate economic growth, step up the creation of sustainable jobs and help reduce poverty levels 4.1.9.In this regard, we are now in the process of concluding our consultations with the IFIs on ZAREP. Central to this, are the negotiations for a Staff Monitored Programme (SMP), under the auspices of ZAREP, with the International Monetary Fund. 4.1.10. Significant progress has been achieved towards finalizing the negotiations with the IMF for the Letter of Intent (LOI), the Memorandum of Economic and Financial Policies (MEFP), and the Technical Memorandum of Understanding (TMU). 4.1.11. The key ZAREP economic and financial policies and targets which will be assessed under an IMF Staff Monitored Programme are in the following areas: Fiscal consolidation and strengthening public financial management in order to restore stability to public finances. This will include ensuring that expenditure is kept in line with revenue, increasing expenditures going to capital projects and social spending, reforms in the areas of tax policy and administration, pay roll administration, gradually clearing outstanding domestic arrears and Diamond Policy; implementing the new
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Restoring external sector sustainability by increasing exports and rebuilding of international reserves;
Enhancing
financial
sector
stability
and
reducing
vulnerabilities in the sector through financial sector reforms and improving the governance of the financial sector through amendments to the Banking Act; Consolidating the reforms at the RBZ, especially the restructuring of its balance sheet; Strengthening and tightening the banking sectors regulatory and supervisory framework; and Strengthening debt management and implementing a prudent borrowing strategy by the implementation of our policies contained in ZAADDS. 4.1.12. I would like to thank Cabinet for its support to this very important programme of re-engaging with our creditors and International Financial Institutions. This will pave the way for starting the process of negotiating for Arrears Clearance, new financing and Debt Relief. 4.1.13. The resolution of our debt overhang will, therefore, allow the country to move forward with its economic development agenda, which focuses on inclusive growth, poverty reduction and job creation.
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4.1.14. In this regard, Government is proceeding with the finalisation and conclusion of the following documents, which I have already presented to Cabinet: Letter of Intent; Memorandum of Financial and Economic Policies; and The Technical Memorandum of Understanding.
4.1.15. These documents will contain the details of the key ZAREP economic and financial policies and targets as outlined above.
5. RESERVE BANK DEBT BILL
5.1.1.Stakeholders will recall that the challenge of the Reserve Bank debt still remains with us. The debt overhang currently stands at US$1.2 billion inclusive of the statutory reserves of US$83.4 million. 5.1.2.Until this issue is cleared, the Reserve Bank is hamstrung from performing its Monetary policy function. 5.1.3.As reported previously, I will soon be presenting Principles of the Reserve Bank Debt Relief Bill, also proposing the creation of a Special Purpose Vehicle to house the debt.
6. CONCLUSION
6.1.1.While the Government has been able to mobilise resources from the domestic market towards funding of the Constitutional Referendum, Government was also forced to forgo timely funding and, hence, implementation
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of
various
critical
Budget
programmes, particularly relating to infrastructure and other social services. 6.1.2.Let me, therefore, commend line Ministries and Government Departments for their support as it became unavoidable to divert some resources from planned projects. 6.1.3.I, therefore, look forward to continued cooperation and support as we move into the next stage of mobilising resources for our General Elections. 6.1.4.In line with policy, Treasury will be updating stakeholders on developments in the economy on a monthly basis.
12 April 2013
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