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Zimbabwe Government Facing US$750 Million 2011 Budget Deficit - FM Biti

Biti said the government will look for receipts from the sale of Marange diamonds to meet additional public sector pay costs through year's end - but warned there must be greater transparency in mining operations

Finance Minister Tendai Biti told parliament Tuesday that the government faces a deficit of some US$750 million this year as spending exceeds revenues, particularly in light of the salary increase granted to civil servants this month against Biti's wishes.

While the 2011 budget provides for expenditures of US$2.7 billion, revenues fell short in the first half of the year to leave a cumulative deficit of US$65 million.

“This is at a time when we face additional expenditure pressures totaling about US$550 million related to critical priority programs in a number of areas,” Biti said.

Biti said the increased pay to public employees will cost another US$42 million a month.

The finance minister said Zimbabwe must return to a policy of living within its means.

Consequently, he said, the government will look for receipts from the sale of Marange diamonds to meet additional public sector pay costs through year's end - though he warned that there must be greater transparency in diamond mining operations.

Biti called for a Diamond Revenue Act to address shortcomings in this respect, as the revenues received by the government have fallen far short of what was expected.

The finance minister said the government will also slash foreign travel by senior officials, and take steps to remove so-called ghost workers from public payrolls.

The government will also restore import duties on basic commodities such as maize meal and cooking oil in the aim, Biti said, of helping domestic producers compete.

“The reinstatement of duties on maize meal and cooking oil will improve the value chain from the farmer to the industry through contract farming, increase capacity utilization, stimulate local production of stock-feed and also enhance employment levels," he said.

But salt and rice will continue to be imported duty-free through year's end as they are not produced within the country.

Biti told Parliament he remains optimistic that the economy is on course to grow by the same 9.3 percent he projected at the beginning of the year.

Economic commentators focused on Biti’s plan to restore import duties on maize and other basic commodities, saying this could open the door to price increases by local producers, straining the budgets of households and boosting inflation.

Masimba Kuchera, chairman of the Zimbabwe Coalition on Debt and Development, said a rise in prices of basic household goods will hurt consumers and the economy.