FINANCE minister Mthuli Ncube yesterday said the country was on track to meet its budget deficit target of 1,5% of GDP in 2020 in a key update that was absent from his mid-term budget last week.
– Reuters/newZWire
Ncube said he would not seek additional funding this year since the national Treasury had spent less than half of its budget despite pressure from the COVID-19 pandemic.
“I am still focusing on a budget deficit of 1,5% of GDP and we are well on our way to achieving that,” Ncube said during a review of the half-year budget held virtually. This would be an improvement on last year’s 4% deficit. It was not clear why that figure was omitted from last week’s presentation.
Economic analysts are worried that President Emmerson Mnangagwa’s government is trying to balance the budget at the expense of spending more on social services such as the health sector, even as it grapples with the coronavirus pandemic.
Zimbabwe is in the grip of its worst economic crisis in more than a decade that has seen a sharp devaluation of its currency and inflation running above 700%, one of the highest in the world.
The government has spooked investors by temporarily shutting the stock exchange saying it was being used to sabotage the economy.
Ncube said the local bourse would only be reopened once investigations into its activities were concluded in two weeks.
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He added that a planned US dollar stock exchange in the resort town of Victoria Falls was set to open next month after Parliament enacted a law for its establishment.
The stock market halted trade on June 29, after the government accused the exchange of being one of the platforms undermining the feeble Zimbabwe dollar.
“We are waiting for the conclusion of the investigations led by the Financial Intelligence Unit (FIU). They should be able to conclude within the next week or two weeks. Then we will review that and then decide on modalities for reopening,” Ncube said in a webinar hosted by the Daily News on Monday morning.
The ZSE’s suspension has deeply damaged already weak investor sentiment and added pressure on Ncube. He made no mention of the ZSE’s fate in his mid-term review statement on Thursday. Recommendations of the FIU, a unit of the Reserve Bank of Zimbabwe, would guide the Finance ministry on how to proceed with business on the bourse.
“It’s just a matter of going through the paces and receiving the reports once the investigation is complete. It should have certain recommendations and we will follow those recommendations so that we are systematic. All we are trying to do as regulators is to intervene the right way; is to be positive about the issue, make sure there is some discipline in our private sector activities.”
The government claims that the ZSE has been used as a base for activities that have undermined the local currency. Authorities blame Old Mutual for the Old Mutual Implied Rate. Private individuals set the alternative exchange rate using differences between the prices of Old Mutual shares in Zimbabwe and those abroad.
Old Mutual denies the allegations and has said it is co-operating with investigators. The ruling Zanu PF party has recommended that the ZSE be reopened. However, it wants Old Mutual delisted and listed on a new forex-denominated exchange.
The FIU is also currently investigating what authorities claim to be “unscrupulous” business practices by mobile phone companies. A search warrant has since been issued on EcoCash, the country’s largest mobile phone operator. Investment professionals say such moves on the market are a grave threat to investment.
“The action to close the ZSE and threat to delist Old Mutual creates an existential threat to the country’s financial, insurance and investment industry,” Investment Professionals Association of Zimbabwe, the association of stock market analysts said in a note last week.
