Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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Biti to present economic review

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 

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. 


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