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Golden Sibanda
Senior Business Reporter
Finance and Economic Development Minister Professor Mthuli Ncube, has done well to minimise the negative impact of the coronavirus pandemic to the economy through a coterie of measures he proposed in mid-term budget on Thursday, captains of industry have said.
Besides the loss of hundreds of thousands of lives globally, the coronavirus pandemic has destabilised economies through disruptions in trade, tourism, production, productivity, global supply chains and various other integration channels.
It must be stressed though that while Zimbabwe’s economy, inevitably, needed a helping hand, as has been the case across the globe due to Covid-19, it’s not all doom and gloom for the domestic economy. While the majority of sectors are under serious distress, a few others have welcomed the pandemic as blessing in disguise.
Although most sectors of the economy were adversely affected by the Covid-19 pandemic, there is variation in terms of severity, with sectors such as tourism, non-food manufacturing, mining, financial services, transport, distribution and education having been adversely affected.
Variably, other sectors such as health services, information communication technology, manufacturing of food stuffs and electricity and water have in fact registered positive growth and that should partially trade off with the decline in contracting areas.
Analysts said the economy was already facing significant headwinds before the outbreak of the Covid-19 pandemic, which has turned the global economy upside down.
With the entire world resorting to bailouts to limit the damage of Covid-19, this came at a time Treasury had little fiscal space to finance rebooting of the economy.
Presenting the 2020 mid-term budget review Minister Ncube, said despite the destablising impact of Covid-19, the budget performance had remained largely on track, but projected the economy to contract 4.5 percent from the 3 percent growth initially forecast late last year.
Minister Mthuli has had to be creative to find effective and sustainable means for financial resources required to give the economy a lift without resorting to printing money, an option would be inflationary, and thus roped in banks to avail the funding while Government guaranteed the loans.
The Treasury chief also provided further interventions through tax relief measures that include waiving import duty on selected imported raw materials, tax credits for Covid-19 donations, interest rate cuts, reduction of statutory reserve requirements and tax relief for Covid-19 imports.
Tax credits will boost firms working capital reserves, low lending rates will make loans cheaper, reduced statutory reserve requirements will shore up banks lending capacity while tax relief for Covid-19 imports will enhance national preparedness for the coronavirus pandemic.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive Takunda Mugaga, commended Minister Mthuli for the cocktail of measures he proposed as part of propping up the economy and limiting the impact of the pandemic.
“The areas where the minister has done extremely well include tax relief measures, and that entails tax relief to workers where he expanded the tax free band to $5 000 (from $2 000) and acknowledging and touching on the fact that private sector needed a bailout package.
“Our only issue is the issue of the post Covid-19 recovery package. What we are proposing is the need to have what we call post Covid-19 economic recovery strategy, which is going to be promoted by His Excellence.
“We want to see His Excellence President Mnangagwa launching the Post Covid-19 Economic Recovery Strategy, possibly before the end of August this year, that is our issue. That will be comprehensive because it will bring together business, labour and politics,” he said.
Mr Mugaga said the post Covid-19 economic recovery strategy should entail providing clarity on the issue of currency, given the current confusion, which sees some economic agents picking on the type of currency they prefer to transact in.
On the major fundamentals, Minister Ncube said he was containing spending within the budget, despite the extra spending needed to alleviate the effects of drought, Covid-19 and the resulting lockdown.
He was confident that he could continue to do so, and said there would be no financing from the Reserve Bank of Zimbabwe and no spending outside the total budget.
In the absence of the economic stimulus package and assuming prolonged and severe impact of the crisis, Minister Ncube said the economy would contract severely.
Beyond 2020, and in line with the upcoming National Development Strategy framework, the minister said the economy is, however, anticipated to recover to record gross domestic product (GDP) growth of about 7,4 percent in 2021 before moderating to around 5 percent thereafter.
But Zimbabwe is not alone in the battle to limit the impact of Covid-19, with the global economy forecast to decline 4.9 percent, while Sub-Saharan Africa’s economy is expected to contract on by an average of 3.2 percent due to the impact of Covid-19.
To boost the economy, Government’s $18 billion bailout package is designed to scale-up production levels across all sectors of the economy, address constraints faced by a large section of small-scale industries, improve health facilities; and reduce poverty and hardships to assist vulnerable groups in society.
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