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Diamond Revenues Key Element in $4 Billion Zimbabwe Budget For 2012

Biti told Parliament he initially drafted a US$3.4 billion budget but following a recent Kimberley Process agreement on the sale of Marange diamonds into Western markets, he increased the budget's scope to US$4 billion

Zimbabwean Finance Minister Tendai Biti on Thursday presented Parliament with a 2012 budget of US$4 billion budget, US$600 million of which he said would be funded with revenues from the sale of diamonds from the controversial Marange field.

Biti told Parliament he had initially drafted a US$3.4 billion budget but in the aftermath of a recent Kimberley Process agreement allowing for the sale of Marange diamonds into Western markets, he increased the scope of the budget to US$4 billion.

The finance minister said his 2012 budget allocates a large share of resources to health, education, water and sanitation, and the struggling agricultural sector.

Biti said the budget is based on the assumption of 9.4% economic growth in 2012 driven by the mining and agriculture sectors. He said it includes measures to help companies outside the Harare capital area, create jobs and empower Zimbabwean youth.

The budget sets aside US$800 million for capital improvements in energy and power and for road restoration and reservoir construction. It includes funds for the constitutional referendum and national census to be conducted next year, he said.

The finance minister said customs duties will continue to be levied on maize meal and cooking oil. Such duties were restored this year to protect domestic producers. Biti said some unscrupulous businesses raised prices after the duties were restored, but he said local producers have now been able to step up production to meet national needs.

Addressing the political context, Biti warned that the budget can't achieve its objectives in an environment of political discord, calling for peace and unity in the country

Economist Tony Hawkins of the University of Zimbabwe voiced the concern that Harare is overspending and might fail to achieve its fiscal targets.

Callisto Jokonya, a former president of the Confederation of Zimbabwe Industry, said he believes the 9.4% rate of growth projected for next year is realistic.

Economist Prosper Chitambara of the Labor and Economic Development Research Institute said the budget rightly addresses social needs in education and health.

Bulawayo based economist Eric Bloch said the budget has positives and negatives.