Zimbabwe Finance Minister warns of govt shutdown over deficit
http://www.theafricareport.com
Thursday, 28 July 2011 16:17
Zimbabwe’s Finance Minister Tendai Biti has warned of a “long winter of
despair” saying there is a real danger of government shutting down
completely down as early as October.
Biti made the warning on Tuesday as he presented his midterm fiscal policy
statement that showed the country’s budget deficit hitting US$700 million
this year, largely because of an unbudgeted salary increment for government
workers.
The statement delivered in parliament policy was a reality check for
Zimbabweans who were becoming optimistic about the country’s economic
recovery and future prospects.
“Zimbabweans must brace themselves up for a long winter of despair,” Biti
said.
“We have made this bed and we must lie in it. Zimbabwe is facing an
unsustainable US$7, 15 billion debts.”
Although macroeconomic fundamentals remained stable and the 9,3 growth
projection for this year was still on track, unbudgeted expenditures seem to
have complicated matters for Biti.
The recent public servants’ salary increases, which would require an
additional US$262 million, and other unbudgeted expenditures amounting to
$500m would put a further strain on the $2, 7 billion budget for this year.
State wages would now take up 65% of revenue, something the International
Monetary Fund warned against in April.
But the minister remained optimistic that the economy will continue with its
positive growth that began in 2009 when President Robert Mugabe formed a
unity government with his former opponents.
“Agriculture and mining, with 19, 3% and 44% growth respectively, are at the
epicenter of this growth,” he said.
“The real problem is not in 2011, it is in 2012 because we are going to
start off with a budget of US$2 billion and US$1,1 billion on anything
else,” he said.
“The real gnashing of teeth will be in 2012 and you must brace for a long
winter of despondency,” Biti said.
“More importantly, there is said a real danger of government running
completely down as early as October 2011.
“We are likely to run monthly cash deficits and we shall face difficulties
in covering obligatory expenditure commitments.”
But the minister unveiled a cocktail of measures aimed at protecting local
industry from cheap imports.
Import duty on some food stuffs ranging between 10 percent and 25 percent
was restored.