2022 Mid Term Budget Highlights

The economy is now projected to grow by 4.6% during 2022, a downward revision from the original 5.5% projection, and follows an estimated 7.8% positive growth trajectory for 2021

This positive 2022 growth projection is supported by increased activity in all the productive sectors except agriculture that was weighed down by the unfavourable 2021/22 rainfall season and high input costs.

Domestic headline inflation steadily accelerated from 60.7% in January to 191% in June 2022, partly due to external factors which impacted negatively on import prices of raw materials, food, fertilizers and liquid fuels.

To year end, inflation is expected to slow down, as Government continues to implement policies that address adverse inflation expectations, speculative tendencies, exchange rate manipulation as well as arbitrage opportunities.

Fiscal deficits have remained within the 3% of GDP threshold, in line with the NDS1 and the SADC Macroeconomic Convergence Target, as the country registered balanced budget (0.4% of GDP surplus) in 2019, a budget surplus of 1.7% of GDP in 2020, and a deficit of 1.7% of GDP in 2021

The structure of Government spending will continue to be reviewed and employment costs including pension limited to below 50% of revenues

For every 1% increase in global food prices, the pass-through effect into the domestic inflation, ranges from 0.1% to 0.6%. depending on the local food supply situation

As inflation continues to rise, economic agents develop a tendency of delaying paying taxes in order to take advantage of loss in the real value, with indications showing that for every 1% increase in inflation real revenue collection is reduced by 0.05%.

Furthermore, dollarization, coupled with high informality continues to shrink the taxable base, with most transactions going underground where most activities are cash based.

Wage pressures, if accommodated above increases in revenue, may become unsustainable and compromise the flexibility of the budget

This is against pressure to also allow most taxes to be levied in local currency. If this is not contained, Government will face serious US dollar cash flow demands

Agriculture remains the cornerstone of the economy, contributing about 10% of GDP and providing livelihoods for about 70% of the population.

Capacity utilisation in the sector has continued to improve, with the 4th quarter 2021 Zimstats Manufacturing Sector Business Tendency Survey and the CZI 2021 Manufacturing Sector Survey Report both indicating increases of 66% and 56.5%, respectively.

With over 70 percent of locally produced goods now constituting shelf space in shops, promoting locally produced goods will further enhance capacity utilization

The mining sector now contributes approximately 11% of the Gross Domestic Product and over 60% in export earnings, with gold, platinum group metals (PGMs), chrome, nickel, diamonds, copper, lithium and coal being the main contributors.

The mining sector is benefiting from firming international mineral prices and increased investments

Priority will be on capacitation of Government institutions to develop and promote the provision of E-Services in day-to-day management of Government business.

However, broad money registered a growth of 245% in May 2022, largely driven by exchange rate depreciation, accounting for over 50% of the increase

To year end, exports are expected to reach US$7.3 billion, spurred by increases in mineral receipts benefitting from the mineral commodity price boom, as well as increases in agriculture and manufactured exports

Similarly, merchandise imports are also projected to reach US$8.1 billion driven by fuel, machinery and raw material imports.

At end of June 2022, public and publicly guaranteed debt stood at ZWL$1.3 trillion and US$13.2 billion, comprised of domestic and external debt, respectively.

The bulk of the Supplementary Budget (53%) is going towards employment costs to cushion public servants against increasing cost of living. The balance of the additional resources are going towards meeting Government consumables (18%), capital projects (19%) and social benefits (7%).

Proposed to review the Tax-Free Threshold on local currency remuneration from ZWL$300,000 to ZWL$600,000 per annum and also adjust the tax bands to end at ZWL$12 million from the current ZWL$6,000,000 per annum, above which tax will be levied at a rate of 40 percent, with effect from 1 August 2022

Proposed to review the local currency tax-free bonus threshold from ZWL$100,000 to ZWL$500,000, with effect from 1 November 2022

Disbursement towards Gwayi-Shangani dam amounted to ZWL$6.7 billion, with the project now at 67.5% completion. Construction of the pipe line has also commenced with the contractors now on site.

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