Zimbabwe’s finance minister announced the government’s annual Budget on Thursday, but the worst economic crisis since independence in 1980 left him little room to manoeuver other than to juggle with numbers, analysts said.
Herbert Murerwa predicted economic growth next year of between two and three percent, pinning his hopes on increased agricultural production, improvements in mining output and tourism and tighter controls over government spending.
The International Monetary Fund has estimated that Zimbabwe’s economy shrank by seven percent this year and predicted a further four percent decline in 2006.
Murerwa said the Budget deficit of revenue against spending dropped this year from a projected 4,6% to about 3%.
He told the Harare Parliament that fiscal measures, including market-linked pricing of goods and of the hard currency exchange rate, were expected to ease acute shortages of food, gasoline and imports and stimulate economic growth.
Professor Tony Hawkins, an economist at the main Zimbabwe university, said imminent growth was unlikely.
”If anyone was hoping the Budget will alter the direction of the economy they are living in a fool’s paradise,” Hawkins said.
He said Murerwa’s predictions on growth and a reduction in inflation from 411% at present to 80% by the end of next year were ”suspect”.
Economic trends, according to independent researchers, pointed to a best case of at least 200% inflation next year.
Murerwa on Thursday reduced value added tax payable to government on general goods and services, from 17.5% to 15%, reversing an increase announced in August.
In his Budget statement, Murerwa acknowledged ”poverty has become entrenched” in the troubled southern African nation.
”We have a society that is now divided between rich and poor and the gap is widening,” he told lawmakers.
Greater economic discipline was needed to bring down inflation and the government would deal swiftly with what he called ”delinquent behaviour” of financial institutions, speculators and profiteers whose activities have fueled inflation.
To stem black marketeering in scarce goods and fuel, market-driven pricing was critical though state subsidies on some goods would be essential to protect impoverished and vulnerable groups, Murerwa said.
He said about 40% of government spending was paid in wages and salaries to generally lowly paid civil servants.
”The public service wage bill is not sustainable,” Murerwa said.
Salary reviews were needed to halt a loss of skills and create ”a leaner and well remunerated civil service”.
Murerwa raised earnings exempt from income tax from Z$1,5-million ($25) a month to seven million Zimbabwe dollars ($115).
The poverty line stands at monthly income of nine million Zimbabwe dollars ($ 150) and consumer groups say nearly 80% of the 12,5-million population are living below the poverty line. About four million people are in need of food aid.
Zimbabwe’s crisis has largely been blamed on economic mismanagement, corruption and disruptions in the agriculture-based economy by the often violent seizures of 5 000 white-owned commercial farms since 2000. – Sapa-AP