Zimbabwe sees higher 2011 growth but no foreign aid
Thu Nov 25, 2010 5:59pm GMT
By MacDonald Dzirutwe and Nelson Banya
HARARE (Reuters) – Zimbabwe expects its economy to grow nearly 10 percent
next year as the key mining and agriculture sectors expand, and will rely
largely on domestic revenue to fund its budget as donors hold back aid.
The southern African country’s economy expanded for the first time last year
under a unity government led by President Robert Mugabe and bitter rival
Prime Minister Morgan Tsvangirai, but investors are still unhappy about
Mugabe’s policies.
GDP growth is seen at up 9.3 percent next year from 8.1 percent in 2010 and
5.7 percent last year, Finance Minister Tendai Biti said in a televised
budget speech on Thursday.
“The economy is set to grow by 8.1 percent this year, compared to 5.7
percent in 2009 on the back of growth in mining by 47 percent and
agriculture at 33 percent,” Biti said.
“In 2011 we anticipate that GDP will grow by 9.3 percent to $8 billion. Our
initial projections were that our GDP would be $5.9 billion in 2011 … we
are ahead of schedule.”
Biti presented the 2011 budget against the backdrop of scant aid flows, with
donors withholding funds crucial to boost an economy emerging from a decade
of contraction mainly over Mugabe’s seizure of white-owned farms for blacks.
Investors have also been rattled by Mugabe’s drive to transfer control of
all foreign firms, including mines and banks, to locals.
Analysts said Biti’s growth projections were unrealistic.
“These are very optimistic figures and I don’t know where that growth will
come (from). I believe growth will be much lower than that,” Tony Hawkins, a
professor of business studies said at the University of Zimbabwe said. The
IMF has forecast growth of 2.2 percent this year.
Biti saw total revenue for 2011 rising to $2.7 billion from $2.25 billion in
2010, adding: “That is the budget we are working with, which is reliant
entirely on domestic resources.”
Zimbabwe had produced 2.7 million carats of diamond this year and sales had
raised $85 million from two auctions. Diamond production is expected to
increase to 4 million carats in 2011.
ELECTIONS CLOUD OUTLOOK
In his speech to parliament, Biti did not give provisions in the budget for
a referendum on a new constitution and for elections Mugabe’s ZANU-PF party
says will be held next year.
Biti, from Tsvangirai’s MDC party, later told journalists an amount had been
set aside but did not elaborate. The next elections would ordinarily be held
in 2013.
Analysts say a rushed vote could derail economic recovery and that if held
without first implementing political reforms, including a new charter
guaranteeing basic rights, it would favour Mugabe, in power since
independence from Britain in 1980.
Biti said the government would increase royalties on diamond sales to 15
percent from the current 10 percent, while those on gold and platinum would
go up to 4.5 percent and 5 percent respectively from 4 percent.
“Despite the increase in international metal prices, royalties collected
from precious metals amounted to a paltry $20.7 million from sales of $593.8
million, during the period January to September 2010,” Biti said.
Zimbabwe, which has grappled with chronic power shortages for the past
decade, would spend $135 million to raise its power generation capacity to
1,650 MW in 2011 from current supply of around 1,000 MW.
“It is our intention to raise power generation in 2011 to 1,650 megawatts by
prioritising the rehabilitation of the Kariba and Hwange stations as well as
the small thermal stations in Bulawayo, Harare and Munyati,” Biti said.
Annual inflation, which slowed to 3.6 percent year-on-year in October,
should accelerate to 4.8 percent by year-end.