Caledonia released its results for the second quarter and six months ended 30 June 2024. Gold production at Blanket mine maintained a positive trajectory relative to last year with output growing 19% y/y in 2Q24 to 20,773 ounces, owing to higher tonnage and grade offsetting the lower gold recovery rate. Average grade achieved in the quarter was 3.31g/t ahead of averages of 3.25g/t and 3.23g/t in FY23 and 1Q24, respectively.
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.
On the global front, geopolitical tensions continued to disrupt global supply chains, fuelling global inflation. Locally, liquidity and foreign currency shortages sustained during the period under review, in addition to rapid local currency devaluation, prohibitive borrowing costs and power shortages.
Growth for Zimbabwe has not been insulated from the headwinds in the region as the domestic economy is now projected to expand by 2% in 2024, down from the 2024 National Budget projection of 3.5%.
Projected national GDP growth for 2024 has been weighed down by the anticipated impact of the El-Nino phenomenon on the agricultural sector. Agriculture is anticipated to decline by 4.9%, dragging overall GDP growth down to 3.5%. Falling international commodity prices will also go into dampening growth prospects for the resource- intensive country with a 1% shock in global prices expected to affect exports by between 0.55% and 0.7% as per the MoFED.
Looking ahead to the current year, Zimbabwe's economy is anticipated to experience a mild recovery, driven by a favorable agricultural season, increased investments in key sectors, and a rebound in commodity prices that will enhance mining revenues. On the demand side, private consumption growth, which had slowed down from 4.8% in 2023 to 2.5% in 2024, is expected to have a rosier year with household spending rebounding by 6.6% in 2025.
