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Zimbabwe Finance Minister Lowers Growth Forecast, Recasts Economic Strategy

  • Gibbs Dube

Finance Minister Biti noted weak foreign direct investment, falling productivity in a number of sectors, scarce credit, inflationary pressures and a lack of clarity in the country's indigenization or black empowerment initiative

Zimbabwean Finance Minister Tendai Biti, delivering a mid-year budget review statement in Parliament on Wednesday, said the economy will probably grow by 5.4 percent this year rather than the more optimistic 7 percent projection he made as 2010 began, adding that economic stabilization plans have run into heavy headwinds.

Biti noted weak foreign direct investment, falling productivity in a number of sectors, scarce credit, inflationary pressures and a lack of clarity in the country's indigenization or black empowerment initiative.

He said revenue shortfalls and minimal donor funding has derailed the economic turnaround program, obliging Harare to adopt new micro-economic measures to resuscitate the economy based on customs duties and taxes.

Biti said the government will have to live within its means with no supplementary budget, sticking to the initial 2010 budget of US$2.2 billion even while increasing public sector wages by US$123 million.

ZANU-PF and MDC parliamentarians also differed sharply on Minister Biti’s proposal to give title deeds to new farmers so they can access bank loans. ZANU-PF said land must remain in the hands of the state.

Chief Parliamentary Whip Joram Gumbo of President Mugabe's ZANU-PF party told VOA Studio 7 reporter Blessing Zulu that Biti’s presentation was on the mark despite some areas of disagreement. Spokesman Nelson Chamisa of the Movement for Democratic Change formation of Prime Minister Morgan Tsvangirai (of which Biti is secretary general) said Biti’s speech focused on the need for the country to get down to business.

Commenting on Biti's policy decisions, economist Eric Bloch said he was disappointed that Biti only raised the tax threshold to US$175 a month, as a higher threshold would have relieved more people and stimulated spending.

Thandeko Zinti Mnkandla, member of Parliament for Gwanda North in Matabeleland North province for the Movement for Democratic Change formation of Deputy Prime Minister Arthur Mutambara, said the finance minister's proposal for a new food-for-work scheme in rural areas will be well-received by Zimbabweans facing hunger.

Biti said Zimbabwe needs to sell its stocks of rough diamonds under Kimberly Process supervision to boost revenues. Citing a report by Kimberly Process Certification Scheme monitor Abbey Chikane which said Zimbabwe has "satisfied minimum requirements of the KPCS for the trade in rough diamonds," Biti said the country should be allowed to sell its diamonds under Kimberly supervision, and any "contradiction" was not in the interest of Zimbabweans.

He proposed amendments to mining legislation to make sure net income from joint ventures with companies developing Marange, whose shareholders remain obscure, should be paid into the Treasury instead of being distributed to the government in the form of dividends on shares. "Furthermore," his statement said, "amendments will be proposed to require immediate disbursements to Treasury following any diamond sales."

In short, Biti said, "it will not be 'business as usual' at Marange."

He noted that the Kimberly monitor had reported sales of US$30 million in Marange diamonds, of which the Treasury and other authorities with oversight "have no record or knowledge."

Biti's position on diamonds differed with that stated by President Robert Mugabe a day earlier. Mr. Mugabe, opening Parliament on Tuesday, said bringing Marange diamonds to market was critical for the country's economic revival. He blamed the West for Kimberly hesitation on certification, and said the country would sell its diamonds whether or not the watchdog organization cleared the way for sale through regular international channels.

Biti urged caution, saying Zimbabwe should try to meet Kimberly standards and seek resolution of a long-running legal battle with African Consolidated Resources over Marange claims and diamonds mined before the government threw out ACR claims to mine in Marange in 2006 and sent in the military to secure the diamond field.