Wednesday, November 26, 2014 Local time: 18:23

News / Economy

Finance Minister Unveils Zimbabwe's $3.8 Billion Budget

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Studio 7
Finance Minister Tendai Biti says Zimbabweans should brace for tough times in 2013 as the country’s economy will grow by only 5 percent next year due to political uncertainty and failure to attract foreign direct investment.

Biti, who unveiled the 2013 national budget of $3.8 billion in parliament Thursday, said the slower economic growth rate will be caused by political tensions as the nation prepares for crucial elections set to end the unity government formed in 2009 by President Robert Mugabe’s Zanu PF party and the two formations of the Movement for Democratic Change (MDC).

He called for political stability in order to ensure that the country records remarkable growth.

The minister set aside funding for the constitutional referendum and 2013 elections, a clear indication that general polls will be held next year.

The minister, who is also the secretary general of Prime Minister Morgan Tsvangirai’s MDC formation, said half of the budget would be gobbled by civil servants’ salaries while the Ministry of Education is expected to receive at least $1 billion.

Health and social services have been allocated $407 million, a marginal increase from last year's largely locally-funded budget.

Biti also proposed that there should be no bank charges for any amount of $800 and below saying that Zimbabwean banks are engaged in what he called "voodoo banking" characterized by high charges.

At least 55 percent of banks’ income is derived from such charges.

The minister proposed a raft of reforms in the financial services sector which include the creation of a position of an ombudsman whose main job would be to protect people from banks that he said are ripping more than enough from bank deposits and charges.

He further proposed tax exemption on incentives for teachers and a non-taxable bonus of $1,000 and expressed concern that imports are still outstripping exports, a situation which is derailing the country’s growth.

He increased excise duty on cigarettes and alcohol saying he expects to raise $11 million from such taxes which would be used for reviving the education sector.

Biti said the 2013 budget was driven by demands in areas of macro-economic stability, attraction of foreign direct investment, food security, dealing with high unemployment levels and the provision of social services - among other issues.

He noted that the government is in the process of crafting a land policy which is now at cabinet level that will put closure and finality to the land reform program.

Some critics have blamed the country’s economic downturn on the chaotic land reforms embarked on by President Mugabe’s former administration.

Biti also proposed to increase exercise duty on alcohol and cigarettes while suspending duty on the importation of motor vehicles by tourism operators as the country prepares to host the United Nations World Tourism Organization general assembly.

He said $20 million has been set aside for the small-to-medium size enterprises to be funded by the Central African Building Society and Commercial Bank of Zimbabwe.

For perspective, VOA Studio 7 turned to parliamentary budget committee chairman Paddy Zhanda and economist Prosper Chitambara of the Labour and Economic Research Institute of Zimbabwe.

Zhanda said he was happy with Biti’s budget but wants Zimbabweans to work together towards localizing production in order to help create jobs and eliminate poverty.
Panel With Paddy Zhanda and Prosper Chitambara
Panel With Paddy Zhanda and Prosper Chitambara i
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