Zim attains $29m budget surplus

Zimbabwe achieved a budget surplus of $29 million last month, the first time in many years, Finance and Economic Development Minister Mthuli Ncube has said.

Addressing journalists in the capital yesterday morning, Minister Ncube said the achievement is the first indication that the country is on track to meet a narrower budget deficit of 5 percent of gross domestic product (GDP) in 2019 from an estimated 11,7 percent this year.

“We have balanced the budget deficit in the month of September and in the month of October. In fact in the month of October we have a primary surplus of $29 million.

“This is the first time this has happened in the longest while . . . so we are walking the talk when it comes to fiscal discipline and fiscal consolidation and balancing that budget,” he said. 

Minister Ncube said balancing of the budget, in combination with several other measures pronounced in the 2019 National Budget, were a first step in the process to carry out currency reforms in Zimbabwe.

Zimbabwe uses a basket of multiple currencies underpinned by the United States dollar, as well as bond notes, which were introduced as an export incentive scheme by the Reserve Bank of Zimbabwe (RBZ).

“Because that (a budget deficit) is a key driver of the value of a currency. The second driver of the value of a currency linked to the budget deficit is just pure money supply. If you look at the growth in the money supply in the last two months since we came into office as a new Government it has slowed down to basically zero; the banks’ balance sheet will show you that. And that’s important for maintaining the value of a currency.

“The other driver of a currency is inflation. Inflation jumped in October, but we now expect that inflation will begin to fall on a month-on-month basis going forward because that jump was a once-off, and now that we have done the structural adjustment upwards, inflation should drop in the month of November and December going forward. So again we won’t have any pressure from the inflation differential going forward,” he said.

 

“The fourth driver is the current account deficit itself, and we believe that the measures we have put in place will go a long way to reduce such demand.

And all of this put together will go a long way in stabilising the currency and set the stage for our roadmap towards currency reforms.

“So everything we are doing in the budget speaks to our currency reform agenda, because we can only do currency reforms when the fundamentals are strong.”