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Commercial Farmers' Union of Zimbabwe

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Post budget developments in the economy: press statement by hon. T. Biti M.P., Minister of Finance

Post budget developments in the economy: press statement by hon. T. Biti M.P., Minister of Finance

25 January 2012

1. Introduction

1.1. The critical importance of the economy and macro-economic stability in 
our country predicates that there should be regular monitoring and oversight 
of all macro-economic indicators and vitals to allow Government, Business, 
Labour and all other stakeholders to plan.
1.2. Given this imperator, Treasury will, therefore, be providing periodic 
communications on major developments within the economy.
1.3. Pursuant to this, I am pleased to advise that each month, I will be 
providing a Monthly Budget Dashboard that will outline monthly budgetary 
developments, tracking in particular Budget performance in the key areas of 
public sector investment and social service delivery.
1.4. In addition, the Monthly Budget Dashboard will also capture and outline 
important developmental challenges and issues affecting our economy.
1.5. Over and above this, Treasury will also produce quarterly economic 
developments, quarterly budget implementation updates and, of course, the 
Mid Term Fiscal Policy Review.
1.6. The Monthly Budget Dashboard and the quarterly economic developments 
are Statutory obligations mandated upon Treasury by Section 7(2)(a) and Part 
4 of the Public Finance Management Act Chapter [22:19].

2. 2011 Financial Accounts

2.1. The Accountant General is in the process of finalising the 2011 
Financial Accounts of the Republic of Zimbabwe and Treasury will Gazette the 
same in February 2012.
2.2. These accounts will capture the Budget outturn for 2011. This is an 
important issue given the fact that the figures I presented in the 2012 
Budget last November were only up to 31 October 2011.
2.3. However, the Preliminary Annual Statement of Financial Performance for 
the year ended 31 December 2011 indicates total revenue at US$2 921 million 
and total expenditure at US$2 890.6 million, resulting in an overall 2011 
Budget surplus of US$30.4 million.
2.4. This outturn allowed for Government to post a small positive opening 
balance which became available for supporting Budget expenditures in January 
2012, mainly salaries and pension payments, at a time when revenue inflows 
are seasonally low.
2.5. The original 2011 Budget had projected total revenues at US$2 746 
million, an estimate which I had revised upwards to US$2 950 million at the 
time of the presentation of the 2012 Budget in November 2011.
2.6. The Preliminary 2011 Budget revenue inflows are broken down as follows:

US$ million
Taxes on Income & Profits 1 072.5
Customs Duties 332.9
Excise Duties 306.6
VAT 911.6
Other Taxes 37.5
Non Tax Revenue 259.9
Total 2 921.0

2.7. The breakdown of the Preliminary 2011 Budget expenditures is as 

US$ million
Employment Costs 1 816.8
Goods and Services 604.7
Capital Expenditure 424.1
Total 2 890.6

3. Liquidity Challenges

3.1. Stakeholders will be aware of reports of challenges with regards to 
liquidity in the entire economy, including the financial system.
3.2. Part of this relates to festive season expenditure pressures on 
financial institutions and the RTGS system.
3.3. This included economy wide high volumes of high value transactions, 
compounded by payments for civil servants salaries and bonuses towards the 
end of December 2011.
3.4. As a result, delays and temporary suspensions of some RTGS payments 
have been experienced.
3.5. Developments of log jams in RTGS payments also adversely impacted on 
the processing of Budget payments for Government projects and related 
3.6. I am happy to note that the Reserve Bank, in conjunction with the 
Bankers Association, has remained on top of the situation, with the latest 
indications showing resolution of some of the major challenges that the RTGS 
system encountered.
3.7. In this regard, the Reserve Bank will be making the necessary 
announcements as part of their routine interaction with the market.
3.8. It will be necessary that given the high volume and high value of 
Budget transactions that Government plays its part with regard to supporting 
orderly transactions within the financial system.
3.9. Pursuant to this, Treasury is instituting the following measures:

Staggering of High Value Transactions

• Staggering payments of high value transactions, in order to allow banks 
sufficient time to plan for such transactions.

Notice Period for High Value Transactions

• Introducing a system of Notice Periods for high value transactions, in 
order to give banks adequate time to prepare for the processing of Budget 
• Notice Periods will be related to the value of the transactions, up to a 
maximum of 7 working days.

Balances with Banks

• Allowing for the build up of reasonable balances with banks to facilitate 
orderly transactions within the financial system. These will be reviewed 
periodically in line with developments in market liquidity.

Civil Service and Pension Payment Dates

• Reviewing the four monthly civil service and pension payment dates to 
allow for a time lag of at least four (4) business days between payments.

Financial Sector Surveillance

• Continued close monitoring of the status and performance of the financial 
sector by the Reserve Bank.
• Enhanced collaboration and sharing of information by all the financial 
sector regulators which include the Insurance & Pensions Commission (IPEC), 
and the Securities Commission (SEC).

4. Transfers to the Exchequer Account

4.1. Reports from the Accountant General’s Office indicate that some banks 
are in arrears in making ZIMRA payovers to the Treasury Main Exchequer 
4.2. This has prejudiced Government revenue inflows, compromising the 
planned implementation of Budget programmes and projects.
4.3. To dissuade banks against this practice, Treasury is introducing 
disincentive measures against financial institutions that are taking long to 
action ZIMRA payment instructions in favour of the Treasury Main Exchequer 
4.4. ZIMRA has already given each of the concerned banks the necessary 
initial written warnings, and has demanded immediate remittance of all 
overdue revenue pay-overs to the Exchequer, as well as written guarantees of 
timely remittances.

5. Use of SDRs

5.1. The balance in Zimbabwe’s General SDR Allocation Account at the IMF, 
net of the US$142.1 million owed to the IMF’s Poverty Reduction and Growth 
Fund Facility (PGRF) Account, currently stands at US$212 million.
5.2. This balance is after Zimbabwe’s drawdown of US$50 million in December 
2009 and a further US$100 million in February 2010 in support of various 
infrastructure projects.
5.3. To augment resources allocated in the 2012 Budget, Treasury is 
withdrawing resources amounting to US$110 million from Zimbabwe’s General 
SDR Allocation Account at the IMF in support of the following:

• Financing of priority infrastructure projects which could not be 
accommodated in the 2012 Budget totalling US$40 million.

Lines of Credit

• US$30 million for lines of credit to the productive sectors of the economy 
currently operating at low capacity. This is part of Government’s 
contribution under the Distressed and Marginalised Areas Fund (DiMAF) where 
Old Mutual has already contributed its US$20 million obligation.

Lender of Last Resort

• US$20 million towards the US$100 million announced in the 2012 Budget in 
support of augmenting the US$7 million already available in the Reserve Bank 
for its Lender of Last Resort mandate.

• US$20 million towards complementing the previously announced support 
towards Agriculture.

6. Banks’ Statutory Reserves owed by the Reserve Bank

6.1. The Reserve Bank currently owes US$83 million to banks in statutory 
reserves, contributing to some of the prevailing liquidity challenges in the 
financial system.
6.2. To facilitate transactions in the money market, Treasury is introducing 
Discounted and Tradable Paper against Reserve Bank statutory reserve 
liabilities to banks willing to participate.
6.3. The modalities and the terms and conditions of issuance will be 
developed in conjunction with the Reserve Bank and the Bankers Association.
6.4. Introduction of this instrument will overcome some of the security 
challenges banks have been facing with regard to accessing the US$7 million 
Lender of Last Resort funds at the Reserve Bank.

7. Tariff Measures Supportive of Domestic Production
7.1. Concerns have been raised by stakeholders over some of the Tariff 
Measures Government implemented from 1 January 2012 as part of the 2012 
Budget in order to support increased domestic production and level the 
playing field vis-à-vis some of the imported commodities.
7.2. This was also against the background of an unsustainable 
over-dependence on consumption of imports at the expense of domestic 
7.3. During the period January to December 2011, declared export shipments 
amounted to US$3.67 billion. This, though 65% higher than the US$2.22 
billion declared in 2010, is significantly out of balance with the overall 
figure of reported foreign payments for various imports of US$6.28 billion.
7.4. Clearly, this level of reliance on external savings is unsustainable, 
making the institution of measures supportive of growth in domestic 
production unavoidable.
7.5. Treasury has, therefore, embarked on the necessary stakeholder 
consultative exercise. The appropriate measures to review some of the 
measures will, thereafter, be instituted.

8. Growth & Inflation Prospects

8.1. In my 2012 Budget presentation I had projected an annual average 
inflation of 4.1% for 2011 and a year-end projection of 5%.
8.2. However, I am pleased to note that actual developments to December 2011 
show lower inflation numbers, with an annual average outturn of 3.5% and a 
year end of 4.9%.

8.3. With regards to overall economic growth developments, Treasury is still 
consolidating and finalising the submissions on the performance of the 
various sub-sectors to the end of 2011.
8.4. Indications, however, are that the economy was on track with regard to 
realising the projected 2011 real GDP growth rate of over 9%.

Hon. T. Biti (M.P.)
Minister of Finance


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