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Biti
delivers demand-driven budget
Kudzai Chimhangwa,
The Standard (Zimbabwe)
November 18, 2012
http://www.thestandard.co.zw/2012/11/18/biti-delivers-demand-driven-budget/
Finance minister Tendai Biti last week delivered what he termed
a US$3,8 billion "demand-driven budget"
against the background of a dual enclave economy, a massive debt
overhang and an acute absence of foreign direct investment.
Biti said Zimbabwe
needed at least US$4 billion as a stimulus package but nobody in
the international finance community could assist.
Speaking at
a Confederation of Zimbabwe Industries post-budget review in Harare
last week, Biti said that it was a difficult budget to craft for
the "simple and bad reason" that 2012 was a challenging
year.
"Between
2009 and 2011, Zimbabwe experienced some kind of economic boom,
with an accelerated growth rate. However, the talk of an early election
deterred that growth although this was shot down at a Sadc Heads
of State and Government meeting in Luanda, Angola," he said,
adding that this development negatively affected business confidence.
He said the
country's current account deficit presently stood at 29%,
with imports constituting close to 9% of Gross Domestic Product
(GDP), and an imports/exports ratio pegged at 3:1.
"We depend
on a false accumulation model where we think we can create wealth
by extracting and importing. The loot committee mentality is still
with us in this present day," he said.
"One of
the key pillars of this budget is industrialisation, [focusing on]
value addition and beneficiation as a response to false accumulation.
Let's process the goods here in Zimbabwe."
He said another
factor that militated against economic growth was the unhelpful
rhetoric around indigenisation, partially contributing to the poor
performance of the stock market and cyclical depression of market
activity.
Biti also revealed
that last month, the World Bank and International Monetary Fund
removed restrictions on engagement with the country that had resulted
in the mobilising of money destined for Zimbabwe.
"The World
Bank is mobilising money, a figure which I disclosed in cabinet;
they are also sending a team to look at the RBZ [Reserve Bank of
Zimbabwe] and public finance systems to see whether Official Development
Assistance can be channelled through government," he said.
The Finance
ministry also revised the GDP growth rate downwards to 4,4% from
9% due to the high budget deficit and cost of wages.
Of the total
budget, 73% would cater for civil service wage bill.
Biti said the
government had in 2012 consumed more than had been budgeted for,
making a travesty of the whole cash budgeting principle.
He however,
said cash budgeting would be maintained throughout 2013 and beyond,
while anticipating capacity utilisation levels of 40 to 50%.
Total revenues
of US$3,8 billion are anticipated next year and of this figure,
recurrent expenditures are set at US$3,3 billion, with only a balance
of US$500 million left for the capital development budget.
The budget introduced
a 15 point road map to address growth slowdown, including attention
to macro-economic stability, savings mobilisation, agricultural
food security, leveraging on mining, social services and safety
nets, youth and women and attention to Small to Medium Enterprises,
scheduled to receive a US$20 million line of credit.
Turning to the
banking sector, Biti said government would soon amend the Banking
Act in a similar fashion to section 26 of the Insurance Act, which
allows the state to prescribe insurance assets.
This move, he
said, was tailored to use the money for the country's development
needs as foreign banks were unwilling to participate in the country's
growth objectives.
The budget also
introduced Paid Up Permanent Shares (Pups) with tax-free status
and any commercial bank that wants to issue Pups would also benefit
from tax-free status.
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