Zimbabwe finance minister Mthuli Ncube presents his budget statementon November 22, 2018 in Harare. Picture: AFP/JEDESAI NJIKIZANA
Zimbabwe finance minister Mthuli Ncube presents his budget statementon November 22, 2018 in Harare. Picture: AFP/JEDESAI NJIKIZANA

Zimbabwe’s finance minister Mthuli Ncube has revised the country’s economic growth downwards as a result of the runaway inflation, and announced a raft of austerity measures to jump-start the ailing economy.

One key measure is the laying off of about 3,000 workers. He also revealed that the government had set aside an initial $53m to compensate white farmers whose land was grabbed by militant Zanu-PF supporters. 

In a budget he dubbed “austerity for prosperity”, Ncube cut the wages for the president, ministers and senior government officials by 5%, adding that the government will further reduce the size of its foreign embassies.

Ncube said Zimbabwe will continue to use the multi-currency system, which is dominated by the dollar and the rand, with the greenback as the currency of reference at 1:1 with the surrogate bond notes local currency.

Presenting the 2019 national budget on Thursday, Ncube conceded that runway inflation had pushed back Zimbabwe’s economic growth forecast from 4% to 3.1%.

“On account of changes to the GDP following rebasing, as well as the inflation profile, especially arising from the October spike, the growth rate projections for 2018 through to 2021 have been revised downwards from those in the transitional stabilisation programme.

“Growth projection in 2019 is anticipated at about 3.1%, which is slightly lower than the 2018 expected growth of 4%, reflecting the impact of unfavourable weather on agriculture and macro-fiscal vulnerabilities from previous unsustainable fiscal and current-account deficits,” he said.

Ncube said he remained hopeful that inflation, which reached 20% in October, the highest since 2008, will be contained leading to an economic growth rate of 7% in 2020.

“The upsurge in annual inflation rate is mainly driven by food and non-food items such as transport services,” he said. “The spike in prices of goods and services appears to have receded, confirming that the main price hikes are a spontaneous response to uncertainty and confidence issues.”

On salary cuts for senior government officials, Ncube said: “It is critical that we reduce public spending on employment costs. As a first step, government has decided that, effective January 1  2019, a 5% cut on basic salary be effected for all senior positions from principal directors, permanent secretaries and their equivalents up to deputy ministers, ministers and the presidium.

“This is also to be extended to basic salaries of those in designated posts in state-owned enterprises — CEOs, executive directors and equivalent grades — including constitutional commissions and grant aided institutions.”

Ncube also introduced the payment of foreign currency duty for vehicle importers, most of which bring the vehicles in via the Beitbridge border post and Durban.

He said Zimbabwe would continue engaging international creditors over its external debt, which accounts for 46% of its total national debt of $17, 69bn. Ncube also revealed that the government would gradually reduce the budget deficit to single-digit level, targeting 5% of GDP for 2019, 4.1% in 2020, and 3% in 2021.