July saw the presentation of the country's Mid-Term Budget and Economic Review. The change in currency from the Zimbabwean dollar to Zimbabwe Gold (ZiG) necessitated reconfiguration of the 2024 Approved National Budget. In this regard, approved expenditure for the year has been translated to ZiG87.9bn. Expenditures to June 2024 have seen 44.2% of the budget being utilized (ZiG38.9bn) with government payroll accounting for 47.6% of the expenditure within the period.
During the first six months of 2024, tax revenue collections amounted to ZiG33.9bn, while non-tax revenue amounted to ZiG2.6b to a total revenue collection of ZiG36.5bn. Value Added Tax contributed 25.3% to revenue, Personal Income Tax contributed 20.7% whilst Excise Duties contributed 12.3% within the period. The deficit for the period under consideration stood at ZiG2.3bn which was financed through borrowing and cash balances carried forward from the previous year. Treasury bills amounting to ZiG1.11bn and US$56.4mn were issued into the market, with 88% of debt resources mobilized from the banking sector. The budget deficit for the year is expected to register at 1.3% of GDP (ZiG 5.6bn), keeping within the confines of the stipulated 1.5% of GDP at ZiG5.6bn.
As per the MoFED, introduction of the new currency has anchored exchange rate and price stability with blended month-on-month inflation decelerating to -0.1% as of July 2024. The fore component of broad money has eased from a peak of 87% in February 2024, down to 84% as of May 2024. In order to create more demand for the ZiG, Corporate Income Tax will be settled on a 50:50 basis for companies whose forex revenue exceeds 50%, whilst this tax will be payable in proportion only in the currency of trade where local currency transactions dominate. In another measure to boost demand for the local currency, user fees to government departments are to be payable in local currency unless specifically provided otherwise.
The mid-term budget statement largely remained in line with the 2024 budget statement, instead, consolidating measures that have been rolled out year to date. To year-end, fiscal policy measures will be deepened to protect the domestic currency, as well as durably restore macro-economic stability. Key focus will be on containing expenditure pressures and major expenditure heads such as the wage bill and debt servicing will be critical to avoid monetizing the budget deficit.
