Zimbabwe Annual Budget Review for 2016 and the 2017 Outlook
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ZIMBABWE ANNUAL BUDGET REVIEW FOR 2016 AND THE 2017 OUTLOOK Presented to the Parliament of Zimbabwe on Thursday, July 20, 2017 by The Hon. P. A. Chinamasa, M.P. Minister of Finance and Economic Development 1 1 2 FOREWORD In presenting the 2017 National Budget on 8 December 2016, I indicated the need to strengthen the outline of the Budget Statement presentation as an instrument of Budget accountability and fiscal transparency, in the process improving policy engagement and accessibility for a wider range of public and targeted audiences. Accordingly, I presented a streamlined Budget Statement, and advised that extensive economic review material, which historically was presented as part of the National Budget Statement, would now be provided through a new publication called the Annual Budget Review. I am, therefore, pleased to unveil and Table the first Annual Budget Review, beginning with Fiscal Year 2016. This reports on revenue and expenditure outturn for the full fiscal year, 2016. Furthermore, the Annual Budget Review also allows opportunity for reporting on other recent macro-economic developments and the outlook for 2017. As I indicated to Parliament in December 2016, the issuance of the Annual Budget Review, therefore, makes the issuance of the Mid-Term Fiscal Policy Review no longer necessary, save for exceptional circumstances requiring Supplementary Budget proposals. 3 Treasury will, however, continue to provide Quarterly Treasury Bulletins, capturing quarterly macro-economic and fiscal developments, in addition to the Consolidated Monthly Financial Statements published monthly in line with the Public Finance Management Act. This should avail the public with necessary information on relevant economic developments, that way enhancing and supporting their decision making processes, activities and engagement with Government on overall economic policy issues. Hon. P. A. Chinamasa, M.P. Minister of Finance and Economic Development 20 July 2017 4 Table of Contents FOREWORD ........................................................................................................................3 CHAPTER 1: REAL SECTOR DEVELOPMENTS .............................................................7 Overall Activity ..............................................................................................................7 Agriculture ................................................................................................................... 7 Mining ....................................................................................................................... 14 Manufacturing ........................................................................................................... 17 Tourism ..................................................................................................................... 19 Construction .............................................................................................................. 22 Small and Medium Enterprises ................................................................................. 27 Prices .........................................................................................................................29 CHAPTER 2: FISCAL REVENUE PERFORMANCE ........................................................32 Revenue Outturn ........................................................................................................32 Revenue Heads .........................................................................................................33 CHAPTER 3: OVERALL EXPENDITURE OUTTURN .......................................................40 Expenditure Outturn ...................................................................................................40 Expenditure Rationalisation .......................................................................................43 Development Partner Support ....................................................................................48 CHAPTER 4: SOCIAL SERVICE DELIVERY & POVERTY REDUCTION PROGRAMMES 49 Health .........................................................................................................................50 Education ...................................................................................................................54 Social Protection ........................................................................................................56 Empowerment ............................................................................................................59 CHAPTER 5: GOVERNANCE SUPPORT PROGRAMMES ............................................60 Electoral Management ...............................................................................................60 Governance and Institutional Building ........................................................................61 CHAPTER 6: DEVELOPMENTS ON MAJOR INFRASTRUCTURE PROJECTS ...........63 Financing of Infrastructure .........................................................................................63 Energy ........................................................................................................................64 Water Supply & Sanitation Delivery ...........................................................................78 Irrigation Development ...............................................................................................85 Transport ....................................................................................................................89 5 Information Communication Technology ..................................................................100 Institutional Accommodation ....................................................................................104 CHAPTER 7: PUBLIC SECTOR BORROWING REQUIREMENTS ...............................106 Borrowing Requirements ..........................................................................................106 Treasury Bill Issuances ...........................................................................................107 Legacy Debt .............................................................................................................108 CHAPTER 8: PUBLIC DEBT ...........................................................................................112 Public External Debt .................................................................................................112 Domestic Debt ..........................................................................................................113 Arrears Clearance ....................................................................................................114 CHAPTER 9: STRUCTURAL REFORMS .......................................................................116 Ease of Doing Business ...........................................................................................117 Public Finance Management Reforms .....................................................................119 Special Economic Zones .........................................................................................122 Local Authorities .......................................................................................................124 CHAPTER 10: FINANCIAL SECTOR DEVELOPMENTS ...............................................126 Banking Sector .........................................................................................................126 Equities Market ........................................................................................................133 Insurance and Pension Industry ...............................................................................135 Financial Inclusion ....................................................................................................141 CHAPTER 11: BALANCE OF PAYMENTS .....................................................................144 Exports .....................................................................................................................144 Imports .....................................................................................................................147 Current Account .......................................................................................................150 Financial Account .....................................................................................................150 CONCLUSION .................................................................................................................152 ANNEXURE: MATRIX OF REFORMS .............................................................................153 LIST OF TABLES .............................................................................................................175 6 CHAPTER 1: REAL SECTOR DEVELOPMENTS Overall Activity 1. In 2016, the economy registered modest growth of 0.7%1, against an initial Budget target of 2.7%. 2. This performance was against an El-Nino induced drought, which had major growth drawbacks on agriculture, down 3.7%; electricity and water which fell by 19% with negative implications on other sectors of the economy. 3. Growth in 2016 was mainly on account of mining, up 8.2%; and services sectors, such as finance and insurance, real estate, distribution, transport and communication, which grew on average by 2%. 4. Household consumption, down by 11.8%, also contributed to the constrained growth on account of low disposable incomes and