This entails: Completion of a new people-driven Constitution; Ensuring the implementation of Media Reforms; Strengthening the Rule of Law; Deepening

Transcription

1 Zimbabwe s Road Path to Economic Recovery Presentation by Hon. T. Biti, MP, Minister of Finance At the 2010 ICAZ Winter School 27 August

2 INTRODUCTION Having successfully stabilised the macroeconomic environment in 2009 guided by STERP I, the thrust of the Inclusive Government is now to reorient the economy towards a growth developmental path. Such a Developmental State should be: Functional; Democratic; and Transformative. 2

3 STAGE A: STABILISATION PERIOD A. STERP I i. Policy consistency ii. Policy boldness 3

4 KEY DEVELOPMENT PILLARS Under such a Developmental State, the key pillars and respective legal, institutional and regulatory frameworks will be: A) Democratisation This entails: Completion of a new people-driven Constitution; Ensuring the implementation of Media Reforms; Strengthening the Rule of Law; Deepening personal freedoms and personal security; Consolidating the enjoyment of the rights to freedom of association and movement; and Implementing a programme of National Healing.

5 KEY DEVELOPMENT PILLARS (CONT ) B) Strong Regulatory State Institutions: Capable of guaranteeing security, freedoms, rule of law, property and human rights and other values. Such State Institutions should be strong with clear defined responsibilities embodied by the separation of powers. These are: The Legislative; The Judiciary;and The Executive / Government.

6 KEY DEVELOPMENT PILLARS (CONT ) C) Strong Market Economy Such an economy should be premised on a Unique Viable Accumulation Model : Championed by agriculture, manufacturing, mining and Information and Communication Technology (ICT) as well as a robust supportive infrastructure base; Promote value addition, beneficiation to the country s natural resource endowments as opposed to the current model relying on exportation of raw material; Embrace strong redistributive mechanisms; and Ensure efficient and effective social protection programmes including social safety nets.

7 STERP II DEVELOPMENT ROAD PATH The promotion of the above agenda is elaborated in the Three Year Macro-Economic Policy and Budget Framework: (STREP II). Specifically, the Inclusive Government will focus on the following:

8 STERP II DEVELOPMENT ROAD PATH (CONT ) AGRICULTURE Agriculture is at the epicentre of the country s recovery and growth, given its linkages with all other sectors. Key Policy Aspects are: Completion of the land audit and establishing a land tenure system that gives entitlement; Sustainable financing mechanism through the banking sector with Government catering for vulnerable groups; Irrigation development; Research and extension services;

9 STERP II DEVELOPMENT ROAD PATH (CONT ) MANUFACTURING The recovery and growth of the manufacturing sector largely depend on the health of key sectors of agriculture and mining. The strategy is to raise capacity utilisation to above 80% by end of STERP II from the current average of 35-45%. Key issues are: Implementing an Industrial Development Strategy that focuses on value addition and beneficiation particularly on those raw materials from agriculture and mining;and Raising the necessary investment for retooling and

10 STERP II DEVELOPMENT ROAD PATH (CONT ) MINING Leveraging mineral resources will be a priority for the country s recovery and growth process.current contribution of mining to GDP of 3.8% and about US$44.8 million to the fiscus in 2009 against a turn over of over US$1 billion is not sustainable and not supportive of the development agenda. Key issues are: Crafting of an Exploration, Registration and Extraction Mining Policy, which will be codified in the proposed amendments to the Mining Act;

11 STERP II DEVELOPMENT ROAD PATH (CONT ) Establishing avenues for beneficiation and value addition consistent with the new accumulation model, this particularly refers to gold, diamonds,platinum, chrome, granite etc; Developing a more equitable Mining Taxation Model that supports the development agenda, empower and benefit communities and respects market principles; Transparent and orderly mining and marketing of alluvial diamonds as well as prudent utilisation of proceeds for the development of the country

12 STERP II DEVELOPMENT ROAD PATH (CONT ) INFORMATION COMMUNICATION AND TECHNOLOGY ICT has revolutionarised the world by increasing access, processing and the speed of information distribution and hence will be a priority in Zimbabwe s developmental path. ICT will therefore become an integral component of every organisation and communities including schools. Key issues are: Development of ICT infrastructure such as base stations, E- Government, E-enabled services, acquisition of equipment such as computers. 12

13 STERP II DEVELOPMENT ROAD PATH (CONT ) PUBLIC UTILITIES Enhancement of higher capacity utilisation in all productive sectors of the economy will require efficient public utilities, particularly in power, water, transport and communication. Given the limited external resources for the development budget, Government has adopted a strategy of increasing budgetary allocations for the rehabilitation and expansion of our utilities. However, capitalisation of utilities will also come from the entities own revenues which has been enhanced by the charging of economic tariffs and adherence to the best practice of allocating at least 70% of revenues for development and service provision by Public Enterprises and Local Authorities

14 STERP II DEVELOPMENT ROAD PATH (CONT ) REDISTRIBUTIVE MECHANISMS Redistributive mechanisms include : A budget which prioritises developmental and social protection programmes consistent with international best practices of ensuring the following allocations by the end of STERP II: Capital budget of 30% of total budget or 15% of GDP; Budget support to Agriculture (10%), health (15%); and research and development (1% of GDP). The drafting of a simplified Income Tax Act which also uphold the principles of equity, neutrality and sharing of the tax burden by all;

15 STERP II DEVELOPMENT ROAD PATH (CONT ) Promoting accountability over the utilisation of public resources through implementation of the Public Finance Management Act; and Strengthening Social Safety Nets.This includes: Government allocating resources for the provision of agricultural inputs to vulnerable farmers; Support for Health services;and Allocations for BEAM.

16 CRITICAL SUCCESS FACTORS Sustaining the road path to recovery critically require the following: Sustaining the current stable macroeconomic environment through: Maintaining the cash budgeting principle to install discipline Maintaining multiple currencies Containing inflation within single digit inflation levels (July inflation down to 4.1% from 5.3% of June)

17 CRITICAL SUCCESS FACTORS (CONT ) Resolving the current high debt overhang of over US$6 billion; Attracting foreign direct investment and the related honouring and processing the respective BIPPAs among other factors; Consistent implementation of credible policies; and Skills retention, attraction and development.

18 OVERVIEW Framework GDP level in US$ 5.6bln 5.9bln 6.3bln GDP Growth (%) Annual inflation (%) Total Investment (%of GDP) Total Savings (% of GDP) Exports of Goods and services (% of GDP) Imports of Goods and Services (% of GDP)

19 I THANK YOU