Budget surplus a move in the right direction

*UPDATED: Zim attains $29m budget surplus

Finance and Economic Development Minister Mthuli Ncube addressing journalists in Harare yesterday said
Zimbabwe achieved a budget surplus of $29 million last month,for the first time in many years.

Minister Ncube said the achievement is the first indication that the country is on track to meet a narrower budget deficit of 5 percent of gross domestic product (GDP) in 2019 from an estimated 11,7 percent this year.

“We have balanced the budget deficit in the month of September and in the month of October. In fact in the month of October we have a primary surplus of $29 million.

“This is the first time this has happened in the longest while . . . so we are walking the talk when it comes to fiscal discipline and fiscal consolidation and balancing that budget,” he said.

“Because that (a budget deficit) is a key driver of the value of a currency. The second driver of the value of a currency linked to the budget deficit is just pure money supply. If you look at the growth in the money supply in the last two months since we came into office as a new Government it has slowed down to basically zero; the banks’ balance sheet will show you that. And that’s important for maintaining the value of a currency.

The other driver of a currency is inflation. Inflation jumped in October, but we now expect that inflation will begin to fall on a month-on-month basis going forward because that jump was a once-off, and now that we have done the structural adjustment upwards, inflation should drop in the month of November and December going forward. So again we won’t have any pressure from the inflation differential going forward,” he said.

“The fourth driver is the current account deficit itself, and we believe that the measures we have put in place will go a long way to reduce such demand.

“So everything we are doing in the budget speaks to our currency reform agenda, because we can only do currency reforms when the fundamentals are strong,” he said.