Zimbabwe Press Statement State of the Economy - March 2013 FINAL FINAL.pdf

7/28/2019 Zimbabwe Press Statement State of the Economy - March 2013 FINAL FINAL.pdf

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PRESS BRIEF

TREASURY STATE OF THE ECONOMY REPORT FOR MARCH 2013

BY

HON T BITI M.P.

MINISTER OF FINANCE

1. INTRODUCTION

1.1.1.This Report gives a preliminary update on economic and fiscaldevelopments for the month of March 2013.

1.1.2.Critical are the additional unbudgeted for pressures on the 2013Budget and the implications on funding arrangements.

1.1.3.The March Report also provides highlights of the Budget financialsupport towards the Constitution Referendum held on the 16 th

March.

1.1.4.The Report also indicates funding requirements for the conduct ofharmonised General Elections, following the conclusion of the New

Constitution making process, in line with the provisions of the

Global Political Agreement.

1.1.5.Following Cabinet approval of the Zimbabwe Accelerated ArrearsClearance Debt and Development Strategy (ZAADDS) in November

2011, progress with the implementation of both ZAADDS and the

Zimbabwe Accelerated Re-engagement Economic Programme

(ZAREP) is highlighted.


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2. STATE OF THE ECONOMY2.1. Highlights

2.1.1.During the first quarter of 2013, while the macro-economicenvironment remained stable as reflected by low inflation levels,

the economy, however, exhibits a number of fundamental

weaknesses which may impact on the 2013 projected growth

target of 5%.

2.1.2.These weaknesses are reflected through liquidity and financingchallenges, limited revenue growth, as well as a widening trade

and current account gap, emanating from depressed exports and

over-dependence on imports.

2.1.3.As a result, capacity utilisation of most productive sectors remainswell below potential, dampening prospects for fast economic

recovery.

2.1.4.On the prices side, inflation was contained below 3% during themonths of January and February 2013, recording 2.5% and

2.98%, respectively. This largely reflected depressed demand due

to liquidity challenges, as well as a depreciated South African rand,

which gave relief to importers.

2.1.5.With regards to key productive sectors, mining output in Januaryand February, particularly for platinum, coal, nickel and chrome

was on the increase and within production targets in line with the

2013 Budget Macro-economic Framework.


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2.1.6.In agriculture, cumulative tobacco deliveries as at 22 March 2013reached 34.1 million kgs, valued at US$126.5 million. The average

price was about US$3.71 per kg, compared to US$3.69 last year.

2.1.7.However, performance of other crops is being threatened by earlydeparture of rains. The actual extent will be ascertained in the

forthcoming First Crop Assessment Survey.

2.1.8.The performance of public finances, however, remains underpressure from huge inescapable expenditure demands against

limited revenue earnings. Revenue collections, which under-

performed in January at US$254.5 million against a target of

US$273.6 million, improved during February, with collections of

US$269.5 million.

2.1.9.By 28 March 2013, revenue collections were US$241 millionagainst the monthly target of US$301 million, which entails raising

US$60 million within the last days of the month in order to meet

the monthly target.

2.1.10.The external sector also continued to face a mounting trade andcurrent account deficit, amid negligible capital inflows, that way

exerting pressure on the balance of payments position.

2.1.11.As at 15 March 2013, monthly exports stood at US$196 million,while cumulative exports since January amounted to US$689

million.


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2.1.12.On the other hand, imports, during the first half of March stoodat US$294 million, while cumulative imports since January stood

at US$1 739 million. This translates into a trade gap of more

than US$1 billion within the first quarter of 2013.

2.2.Government FinancesRevenues

2.2.1.As indicated above, total revenues as at 28 March 2013 wereUS$241 million against a target of US$301.8 million, implying a

negative variance of US$60.8 million, which has to be collected in

the remaining part of the month to meet the monthly target.

2.2.2.Of the total revenue, tax revenue to 28 March was US$235 millionagainst a monthly target of US$286 million, while non-tax revenue

was US$6.1 million against a target of US$15.9 million.

2.2.3.This brings preliminary cumulative revenues during the firstquarter to US$765 million against a quarterly target of US$825.3

million.

2.2.4.The Table below indicates fiscal developments for the period Jan28 March 2013.

JanActual

FebActual

MarchActual(28 Mar2013)

MarchTarget

CumulativeActual

Quarter 1Target

($m) ($m) ($m) ($m) ($m) ($m)

Total Revenue Including ZimraGrant

254.5 269.5 241 301.9 765 825.3

Tax Revenue 245.3 258.8 235 286 739.1 780.2


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Total Non-tax Revenue 9.2 10.7 6.0 15.9 25.9 45..2

O/ W diamonds - - - 5 5 15.0

Total Expenditure IncRetained Zimra Grant

225.6 324.6 221.9 252.1 772.1 775.6

Current Expenditure 220.5 288.1 206.6 235.1 715.2 726.8

O/W Employment Costs 123.1 206.8 155.3 210.0 485.2 495.0

Capital Expenditure 5.1 36.1 6.3 17.0 47.5 44.4

Expenditures

2.2.5.Total expenditures as at 22 March 2013 amounted to US$221.9million against the monthly target of US$252.1 million. Of this

amount, recurrent expenditure was at US$206 million, while

capital expenditure accounted for US$6.3 million.

2.2.6.Employment costs, at US$155.3 million, accounted for 75.4% oftotal recurrent expenditures as at 22 March 2013.

2.2.7.Disbursements for capital development projects were US$8.1million, while actual expenditures stood at US$6.3 million for the

month of March.

2.3.Capital Development Budget2.3.1.Cumulative Capital budget disbursements for the first quarter

amount to US$51.6 million with US$8.1 million relating to the

month of March only.

2.3.2.However, actual expenditures stood at US$6.3 million for theperiod 1 22 March 2013. The majority of these resources were


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channeled towards payment of outstanding certificates for work

done in 2012 and other critical projects.

2.3.3.The Table below indicates the breakdown of capital disbursementsfor the past three months.

Sector OriginalBudget

$

January

$

February

$

March

$

Total

$

Energy 18,000,000 - - - -

Transport & Communication 61,400,000 1,300,000 2,500,000 - 3,800,000

Water & Sanitation 97,225,000 3,000,000 11,500,000 - 14,500,000

Housing 66,073,000 175,000 1,315,000 600,000 2,090,000

ICT 27,210,000 - - 1,100,000 1,100,000

Health 129,600,000 1,051,000 2,135,000 200,000 3,386,000

Education 53,290,000 2,620,000 1,560,000 1,500,000 5,680,000

Social Services 550,000 - - - -

Agriculture 52,350,000 - 13,450,404 100,000 13,550,404

Furniture & Equipment 8,236,000 - 596,279 - 596,279

Vehicles 5,211,000 - - - -

Other 45,855,000 - 2,205,000 4,675,000 6,880,000

Grand Total 565,000,000 8,146,000 35,261,683 8,175,000 51,582,683

Implementation Progress

Transport

2.3.4.Support amounting to US$3.8 million was availed to the Transportsector towards rehabilitation of regional and trunk roads.

2.3.5.Of this amount, US$2.3 million went towards ongoing dualisationworks on the Harare-Goromonzi Turn-off road project, with the

balance of US$1.5 million channelled to other roads and bridge

projects such as Hwedza-Sadza, Harare-Masvingo, Manyame

Bridge, Nyahodi Bridge, among others.


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Harare-Goromonzi Turn-off Road Project

2.3.6.Progress registered on this project is as follows:Activity Cumulative Progress (kms)

Bush Clearing 15.3

Sub grade completed 12.2

Base 3 completed 10.6



Primed 6.0

Tacked 3.1

Sealed 2.3Outstanding 2.2

Part of the Sealed Harare- Mutare Road

Ruwa Bridge

2.3.7.The Mutare abutment and the middle pier are complete. TheHarare abutment is still being worked on with shutters in place in


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preparation for pouring of concrete. Work has also started on the

decks.

Ruwa Bridge

Manyame Bridge

2.3.8.The super structure is complete. Remaining works include theguard and hand rails, crash barriers, approach slab and sealants.

Other works to be completed are bridge approaches, surfacing and

bridge protection works which will be undertaken by the

Department of Roads.


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Guard Rails under Construction

2.4.Airports Rehabilitation ProgrammeHarare Airport Runway

2.4.1.Works at the airport are now concentrated on the rehabilitation ofthe runway. To date 2.2 km are complete and works are now on

the mid-section of the runway, of which 725 metres are milled and

await asphalt laying.

Milled Section of the Runway


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2.4.2.Materials on site include stones and bitumen. Works are yet toresume as the contractor awaits payment of outstanding

certificates.

2.4.3.Laying of the sewer pipes and construction of the pump house arecomplete. Outstanding works include; connections to the

municipal sewer mainline and installation of pumps.

JM Nkomo Airport

2.4.4.The airport terminal building is complete. What remains isspecialist equipment i.e. Common User Terminal Equipment

(CUTE) and Flight Information Display System (FIDS) which should

be bought by CAAZ.

2.5.Water and Sanitation2.5.1.Disbursements to the Water and Sanitation sector amounted to

US$14.5 million, with the bulk of the resources going towards the

payment of outstanding certificates for Tokwe Murkosi Dam

(US$12.5 million) and finishing works on Mtshabezi pipeline

(US$1.1 million).

2.5.2.A total of US$0.5 million was also availed towards boreholerehabilitation for the improvement of water and sanitation in rural

communities. This was targeted at 289 and 254 water points in

Manicaland and Mashonaland Provinces, respectively.

Mtshabezi Pipeline


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Installed Pump Sets

Beitbridge Water Supply

2.5.9.Three of the four sedimentation tanks and a reservoir are nowcomplete. The office block is on the second floor.

2.5.10.The raw water pipeline was 80% complete but was, however,damaged by floods and the contractor is carrying out

rehabilitation works.

2.5.11.The power line has been completed and the transformer hasbeen delivered to site. Outstanding works include installation of

circuit breakers, metering units and completion of the fourth

sedimentation tank. Overall the project is 78% complete.

Chinhoyi Municipality


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2.5.12.The works include the rehabilitation of two sewer treatmentplants and three pump stations.

2.5.13.To date sewer ponds have been dislodged. However, thecontractors have since moved offsite leaving fabrication of bio-

filters, electrical works and installation of pump sets works

incomplete.

Incomplete Pump Installation

Ruwa Local Board

2.5.14.To date, the pipeline has been completed, including theGoromonzi crossing. The installation of pumps and motors at all

the three pump stations, cabling and lighting systems are also

complete. All works relating to ZESA were completed.

2.5.15.The outstanding works include cabling the transformer to thestarters.


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Pump Sets

2.6.Health2.6.1.With regards to the Health sector, a total of US$3.4 million was

disbursed. From this amount, US$0.87 million went towards the

procurement of diagnostic CT scanner for Parirenyatwa Hospital,

US$1.2 million went towards revitalisation of district and provincial

hospitals and US$1.3 million channeled towards construction and

upgrading of other health facilities.

Chinhoyi Hospital

2.6.2.The institution benefited from the Targeted Approach and hasmanaged to procure two service vehicles, three ambulances, X-ray

film processor, rehabilitation equipment, linen and furniture.


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Other works that were undertaken include rehabilitation of the

steam reticulation system and cold rooms.

Home Gym for the Physiotherapy Department

Bindura Hospital

2.6.3.From the resources availed under the targeted approach, thehospital managed to redecorate its buildings, drill two boreholes,

procure medical, laundry and kitchen equipment as well as a

service vehicle and an ambulance.

2.6.4.The water and sewer reticulation system was also rehabilitated.Works in progress include rehabilitation of the 2 existing boilers.


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New Laundry Equipment

Mahusekwa Hospital

2.6.5.The hospital was constructed and equipped under a Chinesefacility.

2.6.6.Government of Zimbabwe is constructing staff houses andupgrading the electricity, water and sewer reticulation.

2.6.7.To date five out of eleven E21 houses are almost complete.Outstanding works include wall and floor tiling, carpentry,

plumbing and painting.


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E21 Staff Houses

St Ruperts Mayer Mission Hospital

2.6.8.The Hospital benefited under the targeted approach. Works doneinclude painting of the whole institution and construction of two

F14 staff houses. The institution also procured medical, laundry

and kitchen equipment, a service vehicle and an ambulance.


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F14 Staff House

Ambulance Acquired Through the Support from Government


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2.7.Education2.7.1.The education sector received resources amounting to US$5.7

million, with US$2.5 million going towards rehabilitation of schoolsand US$3.2 million going towards outstanding certificates at State

Universities.

Bindura University

2.7.2.The Faculty of Science Block I is almost complete. Outstandingworks include electrification and civil works.

2.7.3.The handover is scheduled for end of March 2013 and this willcreate more teaching space.

Faculty of Science Block

University of Zimbabwe


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2.7.4.Rehabilitation of the Students Union building, water and sewerreticulation systems in the Halls of Residences and equipping of

the Geography Department is complete.

2.7.5.Central Kitchen and Dining Hall reconstruction is in progress.Outstanding works include completion of the B.Ed Block, and

rehabilitation of New Complex 5 and Manfred Hodson Hall.

Central Dining

2.7.6.The institution continues to face water challenges.2.7.7.In order to alleviate this problem, construction of a dedicated

water pipeline linking Avondale Pump Station to the University is

underway. All the pipes have already been procured.

Chinhoyi University


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2.7.8.Extension of the kitchen and dining hall is in progress. Thebuilding is at slab level with columns having been erected. Walls

to the offices are at window sill level. The remaining works can be

finished by July 2013 as most of the materials for the remaining

works are on site.

The Engineering Workshop Block

2.7.9.The superstructure of the engineering block and electrical tubing iscomplete. Roofing is 90% complete for the superstructure whilst

the substation is at roof level.

Halls of Residence

2.7.10.At Bindura University, the female block is at the last deck (2ndfloor). The male block is at foundation level and the concrete

pillars have been poured. The wardens house is at window


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level. The contractor is on site and works are expected to be

completed within six months.

Female Halls of Residence at BUSE

2.7.11.Midlands State University hostel is at 2nd floor deck for the femaleblock whilst the male block is at excavation stage. The wardenshouse is at roof level.

2.8.Housing2.8.1.Support towards housing development during the first quarter

amounted to US$2.1 million.

Central Registry

2.8.2.All major works have been completed from the fourth to the ninthfloor on blocks 2A & B and 3 which will house the Registrar

Generals offices, whilst works are currently underway from the


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basement to the third floor. Outstanding works include iron

mongery, partitioning, switches, counters and floor tiling.

2.8.3.Block 1 and 4 will be occupied by the Immigration Department.Works on these blocks are lagging behind. Outstanding works

include diamantine on walls, office partitioning, flooring, iron

mongery, fitting of doors, counters, switches and painting

among other works.

Office Partitioning of the Immigration offices

Mufakose Flats

2.8.4.The super structure of the two blocks is complete. Electricalcabling and piping, plastering, glazing has been done for BlockA. All the materials for the outstanding works are on site.

2.8.5.Outstanding works on Block A & B include external brick dressing,plastering and flooring of staircases and walkway, inside

painting, fitting of built in cupboards, skirting, paving as well as

car parks and landscaping.


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H-Type Blocks of Flats

Dzivaresekwa Phase II

2.8.6.Pipe laying and manhole construction is complete for outfall sewer.Connection to the main line, however, is still outstanding. A

total of 61 manholes have been completed and pipe laying for

the sewer reticulation is complete for 4.336 km. Pipe laying for

water reticulation covering 5.8 km has been completed.

2.8.7.In addition, 450m of storm water drainage have been excavated.Excavation of expansive soil has been done for 9.8 km of theroad network. Sub grade compaction is complete for 2.8 km

while base compaction, prime application as well as surfacing

are still to commence.

A

B


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Road under Construction

Merivale Flats

2.8.8.The first Block of flats is at the second deck whilst the secondblock is yet to commence. Materials on site include plumbing,

electrical, as well as door and window frames. Outstanding

works include completion of the superstructure for the block of

flats, plastering, glazing, flooring, carpentry, electrical, plumbing

works and civil works


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B-Type Block of Flat under Construction

Tafara Flats

2.8.9.Superstructures for the first two blocks are complete while thethird block is at second floor deck. Outstanding works for the

first block include external brick dressing, plastering and flooring

of the staircase, balustrades as well a few plumbing

connections.

2.8.10. The second block requires glazing, skimming, plastering andflooring of the staircase, balustrades, external brick dressing

and apron, built in cupboards as well as skirting and painting.


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Part of the 8 Completed Blocks of Flats

H-Type Blocks of Flats under Construction

2.8.11. An amount of US$13.6 million was availed towards theagricultural sector, of which US$11.5 million was for payment of

obligations under the crop input support programmes and US$2

million for the capitalisation of Agribank.


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2.8.12. Other notable items supported include on-lending to SMEs(US$0.65 million) and compensation to farmers (US$0.5

million).

2.9.AgricultureTobacco

2.9.1.It will be recalled that the tobacco marketing season opened on 13February 2013, with three auction floors participating, namely

Boka Tobacco Floors, Tobacco Sales Floors and Premier Tobacco

Floors.

2.9.2.As at 25 March 2013, total tobacco deliveries were 34.1 millionkgs, valued at US$126. 5 million. The average price was

US$3.71 per kg. Over the same period in 2012, US$106.2 million

was realised from the sale of 28.9 million kgs at an average price

of US$3.69.

2.9.3.The Table below indicates the breakdown of tobacco output andsales figures.

Seasonal TotalAuction Contract Total 2013 Total 2012 % Change

Mass sold(kg) 13, 245,136 20,839,939 34, 085, 075 28, 912, 661 17.89

Value(US$) 48, 739, 578 77, 781,292 126, 520, 870 106, 584, 652 18,70

Average price (US$/kg) 3.68 3.73 3.71 3.68 0.67

Source: TIMB

Food Security


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2.9.4.According to the Zimbabwe National Statistics Agency (ZIMSTAT),the country has to date imported 432 400 tons of maize to

meet the cereal gap of 436 211 tons.

2.9.5.A total of 1.4 million people are currently receiving assistancethrough Government and humanitarian agencies.

2.9.6.Currently, Government is also negotiating with the ZambianGovernment for importation of 150 000 tons of maize valued at

US$60-70 million, as part of the Grain Importation Programme.

2.9.7.The grain importation programme will be funded by bothGovernment and private sector players, in view of the limited

capacity of the fiscus.

Outstanding Obligations to Input Suppliers

2.9.8.To date, outstanding obligations to input suppliers amount toUS$21.8 million. Government remains committed to mobilising

the requisite resources in order to liquidate the arrears, that

way enabling inputs suppliers to support the up-coming winter

wheat and the summer cropping programmes.

Funding of the 2013 Winter Wheat Programme

2.9.9.The 2013 winter wheat production programme has financialrequirements amounting to US$80 million.

2.9.10. Various financing options are being considered and pursued toensure a successful winter wheat programme.


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Agriculture Commodity Prices

2.9.11. International agricultural commodity prices remained relativelyunchanged during the month as measured by the FAO Food

Price Index which averaged 139.6 in February 2013.

Sugar

2.9.12. Sugar prices also declined as indicated by the FAO sugar PriceIndex which averaged 172.1 in January, indicating a fall of

about 3.2 % from the January index of 177.9.


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Cereals

2.9.13. According to the FAO, the Cereal Price Index averaged 162.9 inFebruary 2013, down by nearly 0.8 % from the January value

of 164.2. The values of the monthly index have been falling

since October 2012, mostly on improved crop conditions.

Monthly Real Food Price Indices (2002-2004=100)Date Food Price

IndexMeat Price

IndexDairy Price

IndexCereals

Price IndexOils Price

IndexSugar Price

Index

1/2012 142.3 116.5 138.2 148.9 156.2 223.5

2/2012 144.1 119.1 135.1 151.3 159.6 228.8

3/2012 144.4 119.0 131.7 152.3 163.7 228.6

4/2012 142.4 120.1 124.1 149.3 167.7 216.6

5/2012 136.8 117.0 117.7 147.9 156.3 196.9

6/2012 134.0 113.3 115.9 148.5 147.5 194.1

7/2012 142.3 111.5 115.6 173.9 151.1 216.8

8/2012 142.1 114.0 117.4 173.8 151.0 198.0

9/2012 144.2 116.9 125.5 175.5 150.2 189.6

10/2012 143.4 118.5 129.7 173.4 138.0 192.7

11/2012 141.7 118.9 130.4 170.8 134.0 183.5

12/2012 140.9 120.0 131.5 167.2 131.4 183.2

1/2013 139.8 118.0 131.6 164.2 136.3 177.9

2/2013 139.6 118.0 134.8 162.9 136.9 172.1

% ChangefromJanuary

-0.1% 0.0% 2.4% -0.8% 0.4% -3.2%

Source: FAO Food Price Index: http://www.fao.org


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2.10.Mining2.10.1. Mineral output increased for the month of February 2013, with

platinum recording 1 219.61 kgs from 1 007.59 kgs in January2013. Nickel output increased to 882.88 tons from 739.37 tons

in January 2013, as indicated below.

Monthly Mineral Production

Mineral Jan 2013 Feb 2013

Gold \kg 1,088.4431 1,066.3810

Nickel \t 739.37 882.88

Coal \t 161,716.00 169,622.00

Asbestos \t 160 -

Chrome \t 9,223.00 11,142.00

Platinum \kg 1,007.59 1,219.61

Palladium \kg 767.75 422.63

Copper \t 599.43 702.63

Rhodium \kg 87.81 103.38Source: Chamber of Mines

Gold Production

2.10.2. Gold output for February 2013 was 1 066.38 kgs, slightly lowerthan 1 088.44kgs produced in January 2013.

2.10.3. The Table below indicates monthly gold production for theperiod January to February 2013. March figures are yet to be

submitted.

Gold Output (kgs)

Jan-13 Feb-13 Total

Small scale producers 143.3994 150.4202 293.8196

Large Scale Producers 945.0437 916.1390 1 861.8196

Total 1 088.4431 1 066.5592 2 154.8241Source: Fidelity Printers and Refiners and Chamber of Mines


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2.11.Inflation2.11.1. During the first quarter of 2013, the country continued to

experience stable price levels as reflected by the annualinflation for January and February, which recorded annual

inflation of 2.5% and 2.98% respectively. This was largely

attributed to depressed demand due to liquidity constraints and

depreciation of the rand which provides much relief to

importers.

2.11.2. However, there was a surge in month on month inflation from0.07% in January to 0.95% in February. Major price increases

were recorded in the category of bread and cereals, clothing

and footwear, rentals and hospital services.

2.11.3. Notwithstanding the marginal increase in both month on monthand annual inflation for the month of February inflation in the


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outlook period will remain under control mainly due to

depressed demand on the back drop of liquidity challenges.

2.12.Banking SectorMoney Supply

2.12.1. The year on year growth in money supply decreased from25.36% December 2012 to an annual growth of 21.09% as at

31 January 2013.

2.12.2. Similarly, on a month on month basis there was a reduction of2.0% in the money supply from US$3,886.7 million as at 31

December 2012 to US$3,808.4 million as at 31 January 2013.

2.12.3. The Table below depicts the monthly growth rate in broadmoney and the trend in money supply since 2011.

Broad Money (US$ Millions)

Source: Reserve Bank of Zimbabwe


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2.12.4. In the month of January 2013 the structure of the bankdeposits was as follows; demand deposits (53.3%) followed by

savings and short term deposits (22.4%) and long term

deposits (15.3%).

Structure of Bank Deposits (US$ millions)


Loans and Advances

2.12.5. The loans and advances to the private sector increased by27.5% from US$2.761 billion in 2011 to US$3.519 billion as at

31 December 2012. This translated to a loan to deposit ratio of

79.8%.


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Total Deposits and Loan to Deposit Ratio to Private Sector


2.12.6. The loan distribution was as follows: Agriculture (21%),Distribution (20%), Manufacturing (20%), Individuals (16%)

and Mining sector (7%).



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2.13.Zimbabwe Stock Exchange2.13.1. The stock market rally that occurred during the month of

January and February, however, slowed down during the monthof March as foreign investor participation declined.

2.13.2. The industrial index was oscillating during the month of March2013, opening at 183.98 points, before firming at 190.96

points, and then softening to 185.6 points on 22 March 2013.

2.13.3. Mining index continued to remain subdued, recording 84.07points in January, slightly losing to 83.0 points and further

down to 63.9 points by 22 March 2013.

2.13.4. Consequently, total market capitalisation marginally increasedfrom US$4.751 billion at the end of February 2013 to US$4.761

billion as at 22 March 2012.

Zimbabwe Stock Exchange Performance: 2009 2012



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2.14.External SectorExports

2.14.1. As at 15 March 2013, monthly exports stood at US$196 million,while cumulative exports amounted to US$689 million

compared to US$768.2 million declared in the same period in

2012. This represents a decrease of 10.3% in 2013.

2.14.2. Mineral exports shipments accounted for 68.8% followed bytobacco (14.8%), manufacturing (10.5%), horticulture (4.3%),

agriculture (3.1%), horticulture (2.4%) and hunting (0.4%).

2.14.3. The Table below shows monthly exports by sector.Month Agriculture

$

Horticulture

$

Hunting

$

Manufacturing

$

Mining

$

Tobacco

$

Grand Total

$

January 6,662,179 991,567 571,017 38,412,745 154,795,905 36,853,100 238,286,513February 7,145,151 14,784,115 1,496,153 18,074,441 180,687,785 32,380,345 254,567,990

March 7,461,210 1,094,026 535,880 15,781,774 138,107,707 32,976,379 195,956,976

Total 21,268,540 16,869,708 2,603,050 72,268,960 473,591,397 102,209,824 688,811,479

Source: RBZ, 2013

Mineral Exports

2.14.4. As at 15 March 2013, mineral exports stood at US$473.6 millioncompared to US$510 million realised in the corresponding

period in 2012, representing a 7% decrease.

2.14.5. Platinum dominated mineral exports with US$210 million,followed by gold (US$124 million), diamonds (US$113.7 million)

and as indicated by the Table below.


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Mineral Exports Shipments: Jan - 2013

Mineral 2013US$ m

2012US$ m

Platinum 210,145,375 177,407,311

Gold 124,118,953 122,378,435

Diamonds 113,715,602 180,559,465

Other 25,611,468 39,607,906

Total 473,591,397 519,953,117Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ

Diamond Exports

2.14.6. The total diamond exports for the month amounted toUS$113,7 million, of which Mbada Diamonds had the highest

export shipments of US$ 44,7 million, followed by Anjin

Investments with US$30,4 million, as shown by the Table

below.

Diamond Exports: January -2013

Mining Company US$

Mbada Diamond 44,778,303

Marange Resources 5,325,857

Murowa Diamonds 13,774,989

Anjin Investments 30,423,920

Diamond Mining Corporation 18,460,301

DTZ-OzGeo 833,715River Ranch 118,517

Total 113,715,602Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ

Imports


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2.14.7. As at 15 March 2013, monthly imports amounted to US$ 294million, while cumulative imports stood at US$1,739 million.

This represents a 14% increase from US$1 525 million recorded

during the same period in 2012.

2.14.8. The Table below shows monthly imports.

Month 2013$

2012$

Variance

January 790,898,463 660,166,027 20%

February 654,078,941 571,684,986 14%March 294,181,065 293,540,036 0%

Total 1,739,158,469 1,525,391,049 14%

Source: RBZ

3. PRESSURES ON THE BUDGET

3.1.1.The under-performance of our Revenue, against the backgroundof high Employment Costs, some critical external loan repayment

obligations, the Referendum, Elections, and the unbudgeted for

new requirements in support of Grain Importation all pose major

pressures on the Budget.

3.2. 2012 Population Census3.2.1.The above pressures come up at a time when the Budget is yet to

fully dispense with all the financial obligations arising out of the

August 2012 National Census.


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3.2.2.Treasury is, however, pleased to report that US$4.8 million inoutstanding payments to Enumerators in Masvingo, Mashonaland

West and Mashonaland East were cleared in March 2013.

3.2.3.This has reduced overall outstanding obligations to Enumerators toUS$2.7 million, now only for personnel in Harare Province.

3.2.4.However, ZIMSTAT also has some US$6.3 million outstandingobligations with regards to payment to some of the catering

service providers for the August 2012 Population Census

programme which some Co-operating Partners had committed

themselves to supporting.

3.2.5.ZIMSTAT is in discussion with both the UNFPA and Co-operatingPartners to come up with a disbursement plan to liquidate these

obligations.

3.3. Budget Support for the Referendum3.2.1Requirements3.3.1.Submissions by the State organs overseeing the Constitutional

Referendum had indicated requirements amounting to US$85

million.

3.3.2.This was against a 2013 Budget provision of US$25 million forboth the holding of a Referendum and the conduct of Harmonised

General Elections later in the year.


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3.3.3.In the absence of the financial support of cooperating partners insupport of the Referendum, reliance on mobilisation of additional

domestic financial resources became necessary.

3.3.4.The efforts to mobilise resources were complemented byinstitution of measures to rationalise and streamline the

Referendum funding requirements.

3.2.2Referendum Budget Rationalisation3.3.5.A combination of measures to rationalise payment of allowances,

sparing on procurement of goods and services, containment of the

period of activities and personnel requirements all served to

reduce the 16 March Referendum requirements to US$53 million.

3.3.6.In this regard, Government appreciates the support andcooperation of all stakeholders, including our Departments andpersonnel, who sacrificed to make the process a least cost

success.

3.2.3Disbursements3.3.7.The breakdown of the initial US$31.5 million disbursement

requirements for the Referendum was as follows:

US$2 million to procure indelible ink, pay for printing ofballot paper and voter education pamphlets;

US$2.5 million to cover some voter education costs; US$3.5 million for Referendum materials; US$3 million for vehicle hire;


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US$0.5 million for training; and US$20 million, of which US$5 million facilitated ZRP

deployment.

3.3.8.With the support of all the involved stakeholders, Government wasable to stagger some of the allowance payments, facilitating the

disbursement of US$10 million on 19 March 2013.

3.3.9.This means that an amount of around US$11.5 million remainsoutstanding, and Treasury will be making the necessary

disbursements in line with Budget revenue inflows.

3.2.4Funding Arrangements3.3.10. Government recognition of the need for us to operate within

our own means with regards to the Referendum necessitated

institution of the following funding arrangements:

Issuance of Treasury Bills

3.3.11. Consistent with the prescribed asset requirements forpension funds and insurance companies, Government issued 365

day Treasury Bills.

3.3.12. In this regard, Government appreciates the support of bothNSSA and Old Mutual who were able to take up US$20 million

each at a negotiated coupon rate of 7%. This was in line with

returns on their other investments in the market.


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3.3.13. The necessary Provisions to meet the US$40 millionmaturities related to the issuance of these Treasury Bills will be

made as part of the 2014 Budget.

3.3.14. Government is cognisant of the crowding out effect of theabove market liquidity withdrawal and, hence, the inculcation of

measures to proceed with caution and the support of industry and

the financial market.

3.3.15. It is in this light that discussions over further Treasury Billissuances are being conducted, including with such stakeholders

as Delta and others, under the auspices of CZI support to

Government for hosting of National events.

Excise Duties on Fuel

3.3.16. As reported in the February Report, recourse to the ordinarytax payer with regards to supporting the Referendum also became

unavoidable.

3.3.17. Hence, excise duty on diesel and petrol was reviewedupwards from midnight of 9 March 2013 to the following levels for

the period March-December 2013:

Diesel, US$0.20 to US$0.25 per litre. Petrol, US$0.25 to US$0.30 per litre.

3.4.Budget Loan Repayments


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3.4.1.I have alluded above to critical external loan repayments alsoexerting pressure on the 2013 Budget finances.

3.4.2.During the first quarter of 2013, Government has had to makeUS$76.5 million towards various external loan repayments,

targeted at unlocking access to additional lines of credit.

3.5.Grain Importation3.5.1.Given the constrained fiscal space, the involvement of the private

sector in the importation of grain is unavoidable. Hence, it is

paramount that Government continues to encourage the current

on-going private sector initiatives in the importation of grain.

3.5.2.Millers have already made a commitment to import 150 000 tonsof maize. Some have already started to bring in maize from SouthAfrica at US$320 per ton.

3.5.3.It is in this regard, that Government should, in addition tofacilitating continued private sector importations, also institute

arrangements for a Consolidated Appeal to the World Food

Programme.

3.5.4.Meanwhile on its part, Treasury is already finalising arrangementsto mobilise and ring-fence US$5 million towards the importation of

maize.


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3.5.5.However, until revenues improve, stakeholders will appreciate thatthis can only be at the expense of displacing some budgeted

expenditure programmes.

3.6. Local Grain Purchase3.6.1. The 2012/13 official marketing season commenced on 1 April

2013 and on the basis of precedence, it means that Government

should prepare for the purchase of the locally produced grain.

3.6.2. Clearly, given the parlous state of the finances, an attempt touse the Grain Marketing Board as the buyer of first resort will

create problems for farmers.

3.6.3. Treasury anticipated this in 2012 when it pushed for theestablishment of the Commodity Exchange to allow farmers to

sell their crop at a competitive price and receive paymentimmediately.

3.6.4. In this regard, Treasury will avail US$1 million to the concernedMinistries for the setting up and operationalisation of the

Commodity Exchange as a matter of urgency.

3.7.Domestic Payment Arrears3.7.1. Previous Reports alluded to challenges with regards to build up

of unsustainable stock of domestic debt and payment arrears by

Government, through line Ministries and Departments.


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3.7.2. The stock of arrears to service providers stood at US$146.6million as at the end of December 2012.

3.7.3. This is choking the economy to the extent of creating a debtgridlock where each organisation or parastatal owes the other,

resulting in a paralysis.

3.7.4. Government has already taken the position to avoid any furtheraccumulation of arrears from 2013, with the strategy also

targeting clearance of last years outstanding payment arrears.

3.7.5. Central to the containment of further arrears and timelysettlement of due payments is the consumption of services in

line with budgeted resources and timely billing and validation of

bills between Service providers and Ministries.

3.7.6. In this regard, Treasury issued an administrative circular whichseeks the support of Line Ministries and Service Providers in

aligning the consumption of services to Budget provision and

monthly cash flow targets.

3.7.7. Bills submitted to Government for services rendered during themonth of January amounted to $4.2 million, with an amount of

US$3.8 million having been paid by end of March 2013.

3.8.Public Sector Investment and Social Expenditure CrowdingOut


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3.8.1.The Budget pressures outlined above mean that there is a massiveretrenchment of both our public sector investment and social

expenditure.

3.8.2.In short, this poses a financial crisis which needs to be fullyappreciated across Government.

3.8.3.There appears to be no overall appreciation at present amongstakeholders over the extent of the financial crisis that the

economy is facing and more importantly, there is no regard of the

constrained Revenue the economy is generating.

3.8.4.On the contrary, there is a general desire and appetite to spend,oblivious to the financing challenges of such created expenditures.

3.9.Domestic Borrowings3.9.1.The front loading of our Budget pressures is against the

background of lower Revenues in the first half of the year, thereby

creating serious difficult to sustain cash-flow deficits.

3.9.2.It is on account of these cash-flow deficits, compounded byexpenditure pressures additional to the already approved 2013

Budget, that Treasury has had to undermine companies borrowing

in the domestic financial market through issuance of Treasury Bills

and loan advances.

3.9.3.While the US$40 million facilities from NSSA and Old Mutualassisted us in covering the excessive and inescapable funding


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requirements, we are faced with repayment obligations in terms of

principal amounts and interest.

3.9.4.Domestic debt obligations are compounded by the rising paymentarrears to service providers and capital projects unpaid certificates.

3.9.5.The challenge is that failure to contain excessive commitments ofthe Budget will only result in us running out of potential sources of

borrowing.

3.10.Preparations for the Elections3.10.1. As previously indicated in the Treasury February Report,

financial requirements for the harmonised Presidential and

Parliamentary Elections are estimated at US$132 million.

3.10.2. The 2013 Budget provision of US$25 million was inadequateeven to cover the requirements for the Referendum.

3.10.3. The large resource requirements for funding the Electionswill also necessitate that Government efforts to marshal

cooperating partner support through the United Nations be a

complement to further domestic measures to raise resources

earmarked towards supporting this National Programme.

3.10.4. The level of financial resources from any additional domesticmeasures we might institute will be nowhere near enough to

provide fully for the requirements of the harmonised Presidential

and Parliamentary elections.


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4.1.2.Government has remained committed to the implementation ofZAADDS through the Zimbabwe Accelerate Re-engagement

Economic Programme (ZAREP).

4.1.3.This programme is meant to facilitate accelerated re-engagementwith the International Financial Institutions (IFIs) on policy issues.

It is an important stepping stone towards negotiations for Arrears

Clearance, Debt Relief and new financing from the international

community, including the International Financial Institutions (IFIs).

4.1.4.Significant progress has been made in implementing ZAADDS, withthe Debt Management Office now fully operational. Updating of

the external debt data-base is on-going with over 90 per cent of

the data-base now validated and reconciled with creditors.

4.1.5.The re-engagement with creditors and International FinancialInstitutions (IFIs) has progressed well. As reported in my February

2013 State of the Economy Report, we had an IMF Mission from

25 February 1 March 2013.

4.1.6.During the IMF Mission, we held discussions and consultations onthe consolidated key ZAREP Economic and Financial Policies and

Targets.

4.1.7.These economic and financial policies are guided by the 2013National Budget which was presented to Parliament in November

2012, and the Zimbabwe Medium Term Plan (MTP) 2011 to

2015. These policies are aimed at unleashing Zimbabwes

economic growth potential.


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4.1.8.Sustainable and inclusive growth will be achieved by theimplementation of sound and credible economic and financial

policies. This will accelerate economic growth, step up the creationof sustainable jobs and help reduce poverty levels

4.1.9.In this regard, we are now in the process of concluding ourconsultations with the IFIs on ZAREP. Central to this, are the

negotiations for a Staff Monitored Programme (SMP), under the

auspices of ZAREP, with the International Monetary Fund.

4.1.10.Significant progress has been achieved towards finalizing thenegotiations with the IMF for the Letter of Intent (LOI), the

Memorandum of Economic and Financial Policies (MEFP), and the

Technical Memorandum of Understanding (TMU).

4.1.11.The key ZAREP economic and financial policies and targetswhich will be assessed under an IMF Staff Monitored Programme

are in the following areas:

Fiscal consolidation and strengthening public financialmanagement in order to restore stability to public finances.

This will include ensuring that expenditure is kept in line with

revenue, increasing expenditures going to capital projects

and social spending, reforms in the areas of tax policy and

administration, pay roll administration, gradually clearing

outstanding domestic arrears and implementing the new

Diamond Policy;


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Restoring external sector sustainability by increasing exportsand rebuilding of international reserves;

Enhancing financial sector stability and reducingvulnerabilities in the sector through financial sector reforms

and improving the governance of the financial sector through

amendments to the Banking Act;

Consolidating the reforms at the RBZ, especially therestructuring of its balance sheet;

Strengthening and tightening the banking sectors regulatoryand supervisory framework; and

Strengthening debt management and implementing aprudent borrowing strategy by the implementation of our

policies contained in ZAADDS.

4.1.12.I would like to thank Cabinet for its support to this veryimportant programme of re-engaging with our creditors and

International Financial Institutions. This will pave the way for

starting the process of negotiating for Arrears Clearance, new

financing and Debt Relief.

4.1.13.The resolution of our debt overhang will, therefore, allow thecountry to move forward with its economic development agenda,

which focuses on inclusive growth, poverty reduction and job

creation.


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4.1.14.In this regard, Government is proceeding with the finalisationand conclusion of the following documents, which I have already

presented to Cabinet:

Letter of Intent; Memorandum of Financial and Economic Policies; and The Technical Memorandum of Understanding.

4.1.15.These documents will contain the details of the key ZAREPeconomic and financial policies and targets as outlined above.

5. RESERVE BANK DEBT BILL

5.1.1.Stakeholders will recall that the challenge of the Reserve Bankdebt still remains with us. The debt overhang currently stands at

US$1.2 billion inclusive of the statutory reserves of US$83.4

million.

5.1.2.Until this issue is cleared, the Reserve Bank is hamstrung fromperforming its Monetary policy function.

5.1.3.As reported previously, I will soon be presenting Principles of theReserve Bank Debt Relief Bill, also proposing the creation of a

Special Purpose Vehicle to house the debt.

6. CONCLUSION

6.1.1.While the Government has been able to mobilise resources fromthe domestic market towards funding of the Constitutional

Referendum, Government was also forced to forgo timely funding

and, hence, implementation of various critical Budget


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programmes, particularly relating to infrastructure and other social

services.

6.1.2.Let me, therefore, commend line Ministries and GovernmentDepartments for their support as it became unavoidable to divert

some resources from planned projects.

6.1.3.I, therefore, look forward to continued cooperation and support aswe move into the next stage of mobilising resources for our

General Elections.

6.1.4.In line with policy, Treasury will be updating stakeholders ondevelopments in the economy on a monthly basis.

12 April 2013

Documents

Zimbabwe Press Statement State of the Economy - March 2013 FINAL FINAL.pdf