According to the revised projections, the key sectors of the economy are not expected to perform in 2016.
Therefore growth has been projected as follows:
- Agriculture – 4.2% against 1.8% in the budget
- Mining 13.2% against 1.6% in the budget
- Manufacturing 0.2% against 2.1% in the budget
- Tourism 2.4% against 4% in the budget
Lack of domestic and foreign investment is undermining growth.
It is ironic that the theme of the mid-year budget review statement talks about “building a conducive environment that attracts foreign direct investment”. Yet policies such as the indigenization and economic empowerment are scaring away capital. As we all know, capital is a coward. Domestic investment is affected by .the current liquidity challenges and prohibitive lending rates, which are short-term in nature.
Sluggish growth, coupled with a low inflation rate of 0.4% means that the economy is stuck in a deflationary mode.
1.3 Financial Sector Stability
Although all the banks are said to be in compliance with the prescribed minimum capital requirements and recording profits, we must take note that some of the financial institutions are heavily exposed to Treasury Bills. Hence they cannot meet demand deposits.
The cash shortages are still persisting. The imposed withdrawal limits are still in place. Restrictions on external payments are also still in place. The issue of Bond Notes is conspicuous by its absence from the Mid-Year Fiscal Policy Review Statement. The Minister did not even mention the $200 million Afreximbank facility. We can only deduce that there was no such agreement from the Afreximbank in the first place.
1.4. Six months Trade Deficit (Jan to June 2016)
Exports contribute 60% of the liquidity flows into the country. At June 2016, the value of exports stood at $1.124 billion compared to $1.232 billion during the same period in 2015. Imports stood at $2.496 billion, compared to $2.917 billion during the same period in 2015. Hence the current account deficit during the six months period stood at $2.5 billion which constitutes 12% of GDP.
Diaspora remittances stood at $387 million compared to $457 million during the first half of 2015.
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