Zimbabwe’s 2008 budget seems bereft of concrete measures to curb hyperinflation and ill suited to provide the economic rebound it promises a population faced with growing hardship.
The Southern African country, facing the uncertainties of presidential and parliamentary elections next year, is in the grip of a punishing recession. It endures the world’s highest inflation rate at nearly 8 000%, rising unemployment and shortages of foreign currency, fuel and food.
Finance Minister Samuel Mumbengegwi said on Thursday the worst was over and the economy was set to rebound, with growth of 4% in 2008 after nearly a decade in decline. Inflation would average below 2 000% as farming output improves.
But critics said there were no concrete plans given to support economic growth, while Mumbengegwi’s failure to devalue the Zimbabwe dollar would affect export earnings.
In what he called the ”people’s budget”, Mumbengegwi offered tax relief to workers and allocated Z$7 840-trillion ($261-billion at the official exchange rate but $5,2-billion on the parallel black market) in spending.
The figure is nearly 200 times total spending and borrowings for 2007, which analysts say showed the inflation outlook had worsened.
Shunned by the West over policy differences such as President Robert Mugabe’s seizure of white-owned commercial farms for blacks and the threat to nationalise foreign-owned firms, Harare has relied on borrowing locally and printing cash to fund its budget deficit.
”This government will certainly print and borrow more money,” Tendai Biti, the main opposition Movement for Democratic Change (MDC) secretary general, said.
”This will trigger off more inflationary pressures [and] more inflation means further theft on the people’s savings and incomes,” said Biti.
Conditions are harsh. Urban workers have had to contend with burst sewers, frequent water and electricity cuts and crumbling infrastructure while prices have started rising again.
The World Bank says Zimbabwe’s economy is the fastest shrinking outside a war zone and has contracted by about 40% in real terms in the past eight years.
Industry plunged into deeper crisis in June when Mugabe imposed a tough price freeze to halt sharp increases.
This forced manufacturers to stop producing, fearing heavy losses, while shops were emptied of basic goods.
The government has poured funds into the agriculture sector. Although it has dubbed the 2008 farming season ”mother of all agriculture seasons”, analysts said shortages of goods like fertiliser, fuel and seed could still hit output.
Mining, now a top foreign currency earner following the collapse of agriculture, faces shortages of foreign exchange, uncertainty over ownership, power cuts and flight of skills.
”The major constraint is on production on the real sectors which are faced with many challenges and by and large the minister did not address that and his projections will not be met,” said ZABG Bank chief economist David Mupamhadzi.
Wildcat strikes
Workers who have embarked on wildcat strikes this year are seen staging more boycotts as the economic crisis worsens, ratcheting up tensions and pressure on Mugabe, who however faces a weak and divided opposition at the polls.
Mumbengegwi offered some tax relief to workers but critics said it was too little and would be quickly eroded by inflation.
Mugabe (83) and in power since independence from Britain in 1980, denies charges of mismanaging the economy and dismisses critics suggestions that his prolonged stay in power would hurt Zimbabwe’s chances of turning around the economy.
”I don’t see any change for me, maybe things will be worse because prices are increasing at a faster rate now,” said Simon Bakare, a salesperson at a Harare clothing shop. – Reuters