Biti to present economic review
25/06/2012 00:00:00
by Roman Moyo
FINANCE Minister Tendai Biti faces tough choices when he presents his half
year economic review this week with the 2012 national budget already thrown
off the rails by underperforming revenues with initial growth projections
now clearly unachievable.
The US$4 billion 2012 National Budget had projected 9,4% economic expansion,
underpinned by growth in the mining and agriculture sectors. But both
sectors have failed to perform to expectations while liquidity challenges
that have plagued the economy over the last few years remain.
The coalition cabinet recently held an emergency meeting over the economy
after it emerged that revenues would this year fall far below expectations
with Biti principally blaming the alleged non-remittance of money from
diamond sales.
Prime Minister, Morgan Tsvangirai recently claimed only US$25 million had
been received from diamond sales against projections of about US$600 million
for the whole year.
Biti has already hinted he may have to revise downwards his growth
projections and he will also be under pressure to find money for food
imports after this year’s maize crop was hit by drought in some parts of the
country.
Compounding his problems is the possibility of new elections this year which
would have to be preceded by a constitutional referendum, all of them
expensive exercises for which the government just does not have the money.
Analysts have also warned Biti will need to make available increased funding
for economic performance enablers such as the energy ministry, in particular
the power utility Zesa, as well as rehabilitate the country’s dilapidated
telecommunications and roads infrastructure.
Economist Brains Muchemwa said corporate bankruptcy was on the rise and
urged Biti to press for changes in the country’s labour and bankruptcy laws
to safeguard corporate solvency and help create a soft landing for companies
on the brink of collapse.
“Without these changes, the economy will remain fragile, and indeed
government revenues will continue to exhibit sustained weakness,” he said.
“Government will need more creativity to broaden the tax revenue base in
ensuring that the financing of the budget was sustainable in a manner that
would be able to influence the macroeconomic activities more positively.”
Muchemwa also said the government must consider new taxation regimes for
valuable mineral classes such as diamonds and platinum warning that without
such changes incremental revenues from the normal taxation activities will
continue to be fragile.
Economic consultant John Robertson has also urged Biti should allocate more
money to sectors that have strong primary multiplier effects on employment
creation so that the secondary effect on
government revenue creation would assist in repaying the country’s loans and
put the economy on a sustainable growth path.
“We need to start creating the platform for reviving the defunct middle
class. And the government, being the single largest player in the market
now, should have the right priorities in place to create a
sustainable middle class to cultivate strong and rising domestic demand that
will provide the vital anchor for growth,” Robertson said.
“An economy, just like a private company, needs to run on goodwill and
competitive economic pricing. And with the dollarised economy, good times
lie in waiting.”
Muchemwa added that Zimbabwe needed a strong private-public sector
partnership framework that would revive its infrastructure much faster and
put an end to fiscal antics of attempting subsidies on empty coffers.