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Revised Budget Dashes Infrastructure Repair Hopes

FINANCE minister Tendai Biti on Wednesday reduced budget figures by almost half meaning the government will take longer to rehabilitate decaying infrastructure, restore services in hospitals and rebuild schools.

Presenting his first budget, Biti said government would operate on a cash budget basis. “We are embarking on the basic law of cash budgeting. No ministry or public agency or parastatal should expect to spend beyond what we have collected. What we gather is what we eat,” said Biti.

A sectorial distribution of the budget reveals that 47% will be for social services, while economic activities, water and agriculture which stimulate the country’s production will account for 19% and 6%. Security accounts for 20% while administration is 8%.
The economic classification of the 2009 National budget shows a country in need of “an urgent rescue package”.
Under the classification, capital expenditure accounts for 19% when grant support is 15%. Pensions take up 8% of the distribution. Employment costs take up 28% while operations account for 30%.
Biti said government revenues were running at about US$30 million in March and US$25 in February compared with the US$140 million forecast in January. Economic analysts said the Zimbabwe Revenue Authority (Zimra) did not have the capacity to meet its targets because there has been no revenue collection.
Companies are said to be preparing false payrolls which give an impression that they are paying their employees in local currency when in fact they are being paid in foreign currency.
Total spending was set at US$1 billion, down from US$1,9 billion in the original budget. This is a loss of budgeted expenditure of 43%.
Revenue inflows were revised downwards to US$1 billion from US$1,67 billion.
Biti put cumulative government revenue for the first two months at US$37 million which is far short of the public service wage bill estimated at US$60 million.
The Finance minister forecast a government wage bill for 2009 of US$299 million which, with a total public sector workforce of about 250 000, implies an average monthly wage of just US$120.
Last month public servants were paid an allowance of US$100, which Biti said could not be increased.
Economist Tony Hawkins said government spending requirements would exceed US$2 billion, which is why it was imperative that Zimbabwe engages the international community for financial support.
“More than a third of this is required to rehabilitate infrastructure and public utilities. Less than a third of projected revenues will come from direct taxes on incomes and profits, compared with a pre-crisis average between 1996 and 2004 of 56%,” said Hawkins.
Biti told parliament he would not be changing inflation and growth targets given in the budget drawn up before the power-sharing government was installed in February.
The initial budget forecasted 2% economic growth in 2009.
Biti indicated that the country’s national currency was no longer in use. “The death of the Zimbabwe dollar is a reality we have to live with. Since October 2008 our national currency has become moribund,” Biti said. “In this regard, I therefore announce the removal of all foreign currency surrender requirements.”
The almost forgotten Zimbabwe dollar can also start gaining some value once local production increases.
Biti abolished the foreign currency “surrender” requirements of 7,5% of export revenues and 5% of retail and industrial turnover, a move seen by economists as an attempt to boost productivity.


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