Home » Industry » Zim’s Fiscal Space Remains Constrained – AfDB

The African Development Bank (AfDB) says Government borrowing has remained the main driver of domestic credit growth since November 2013 as the country’s fiscal space remains constrained due to subdued economic activity. In the Zimbabwe monthly economic review for the period to March, AfDB said high informalisation of the economy and declining commodity prices, among other factors has been a challenge to the country’s revenue base.

Total domestic credit growth for the period decelerated to 3,57 percent in February 2015 from 8,49 percent in February 2014 on the back of slow economic growth, high credit risk and liquidity shortages.

“The Government of Zimbabwe continues to operate with tight fiscal space where total Government revenue for the month of February 2015 was 9,8 percent lower than the targeted amount due to under-performance of the various revenue heads.

“On the other hand, Government expenditure in February 2015 was 0,5 percent below the target, indicating a move by the Government to contain costs in the face of shrinking fiscal space,” said AfDB.

On sectoral performance focusing on agriculture, international prices for maize and wheat continued to be subdued in March 2015 compared to same period in 2014 due to abundant supplies on the world market.

In March 2015, wheat price reached a high of $261 per tonne and a low of $240 per tonne whereas for the same period in 2014 wheat price reached a high of $356 and a low of $315 per tonne.

AfDB said the country is expected to remain a net wheat importer given that fewer local producers are expected to take up the crop owing to financial constraints.

AfDB said manufacturing sector is still struggling although there are some players in the dairy industry registering positive performance. Some dairy producers such as Dendairy and Alpha Omega Dairy Limited managed to penetrate Mozambique and Botswana export markets, respectively.

On the economy’s performance on the external sector, total exports for January and February this year increased 12,1 percent to $527,8 million compared to the value registered during the same period in 2014. AfDB said this was mainly driven by flue-cured tobacco exports which increased by over 400 percent in February 2015.

“Similarly, total imports during the first two months in 2015 increased by 7,7 percent to $1,04 billion, compared to the same period in 2014 as they were mainly driven by fuel and lubricants, which constitute about 30 percent of the imports,” said AfDB.

During the period under review, the stock market was characterised by a decline in turnover value by 45,64 percent while the volume of shares traded on the local bourse increased by 230,32 percent.

AfDB said the stock traded depreciated in value, underpinned by low foreign investor confidence on the local bourse on the back of a slowdown in general economic activity.

Source : The Herald