FINANCE minister Tendai Biti last week delivered what he termed a US$3,8 billion “demand-driven budget” against the background of a dual enclave economy, a massive debt overhang and an acute absence of foreign direct investment.
BY KUDZAI CHIMHANGWA
Biti said Zimbabwe needed at least US$4 billion as a stimulus package but nobody in the international finance community could assist.
Speaking at a Confederation of Zimbabwe Industries post-budget review in Harare last week, Biti said that it was a difficult budget to craft for the “simple and bad reason” that 2012 was a challenging year.
“Between 2009 and 2011, Zimbabwe experienced some kind of economic boom, with an accelerated growth rate. However, the talk of an early election deterred that growth although this was shot down at a Sadc Heads of State and Government meeting in Luanda, Angola,” he said, adding that this development negatively affected business confidence.
He said the country’s current account deficit presently stood at 29%, with imports constituting close to 9% of Gross Domestic Product (GDP), and an imports/exports ratio pegged at 3:1.
“We depend on a false accumulation model where we think we can create wealth by extracting and importing. The loot committee mentality is still with us in this present day,” he said.
“One of the key pillars of this budget is industrialisation, [focusing on] value addition and beneficiation as a response to false accumulation. Let’s process the goods here in Zimbabwe.”
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He said another factor that militated against economic growth was the unhelpful rhetoric around indigenisation, partially contributing to the poor performance of the stock market and cyclical depression of market activity.
Biti also revealed that last month, the World Bank and International Monetary Fund removed restrictions on engagement with the country that had resulted in the mobilising of money destined for Zimbabwe.
“The World Bank is mobilising money, a figure which I disclosed in cabinet; they are also sending a team to look at the RBZ [Reserve Bank of Zimbabwe] and public finance systems to see whether Official Development Assistance can be channelled through government,” he said.
The Finance ministry also revised the GDP growth rate downwards to 4,4% from 9% due to the high budget deficit and cost of wages. Of the total budget, 73% would cater for civil service wage bill. Biti said the government had in 2012 consumed more than had been budgeted for, making a travesty of the whole cash budgeting principle.
He however, said cash budgeting would be maintained throughout 2013 and beyond, while anticipating capacity utilisation levels of 40 to 50%.
Total revenues of US$3,8 billion are anticipated next year and of this figure, recurrent expenditures are set at US$3,3 billion, with only a balance of US$500 million left for the capital development budget. The budget introduced a 15 point road map to address growth slowdown, including attention to macro-economic stability, savings mobilisation, agricultural food security, leveraging on mining, social services and safety nets, youth and women and attention to Small to Medium Enterprises, scheduled to receive a US$20 million line of credit.
Turning to the banking sector, Biti said government would soon amend the Banking Act in a similar fashion to section 26 of the Insurance Act, which allows the state to prescribe insurance assets.
This move, he said, was tailored to use the money for the country’s development needs as foreign banks were unwilling to participate in the country’s growth objectives.
The budget also introduced Paid Up Permanent Shares (Pups) with tax-free status and any commercial bank that wants to issue Pups would also benefit from tax-free status.
