HARARE Zimbabwe will have to rely on an expected diamond windfall from the notorious Marange fields and may need to squeeze more revenue from a fragile economy to balance its budget as donors withhold desperately needed funding to press for more reforms from President Robert Mugabes ZANU-PF party, analysts said. Finance Minister Tendai Biti gave a somber budget preview last week, warning that the countrys recovery was under threat from lack of foreign investment and promised donor support.
In his initial 2010 budget speech, Biti had given an upbeat forecast of 7 percent GDP growth and expected donors to pour in $800 million towards the national budget, but he told parliament this week that only $200 million had come from donors and predicted slower economic growth.
The Movement for Democratic Change secretary general however did not announce a supplementary budget to fill in the hole left by donors, instead he said revenues had surpassed target and spoke of a government consensus to takeover all the alluvial diamond mining in the country, signaling high expectations of a huge windfall from diamonds.
I think he has done the right thing by keeping the original budget figures in there and using the higher revenue that they are getting to reduce the amount of reliance on the vote of credit, John Robertson, a Harare-based economic consultant said.
Analysts cheered the move to bring mining of alluvial diamonds, mostly found in the sprawling Marange fields in the east of the country, under the control of the state.
Biti said the government could not account for US$30 million earned from exports of its controversial diamonds from the notorious Marange fields after an audit by Kimberley Process certification scheme monitor Abbey Chikane, a South African.
I am one of those people who welcome the decision on diamonds that they are going to nationalise the Marange diamonds. We dont know whats going on, we should know whats going on, said Anthony Hawkins, a business studies professor at the University of Zimbabwe.
We dont know how much money is there really, we seem to be getting odd figures. We need to know and the only way we will know is when the government takes over and not these other guys, so I really agree with that.
A meeting of the KP in Russia last Thursday agreed to allow Zimbabwe to export diamonds from Marange, a development welcomed by analysts who had warned that any exports outside the KP system would have seen the gemstones sold through third parties on the black market with the revenue never finding its way into public coffers.
Mines Minister Obert Mpofu has previously said that Zimbabwe was sitting on
4.5 million carats of stockpiled diamonds that could raise an estimated US$1.7 billion on the makert, money the country badly needs.
The unity government, which was formed in February last year has previously said it needs $10 billion to revive an economy shattered by a decade of collapse and marked by hyper-inflation acute shortages of foreign exchange.
The economy grew for the first time in a decade last year but Biti said empowerment rules enacted earlier this year had rattled investors while confidence in the economy had waned during the first half of 2010.
Revenues had however surpassed target by a handy $300 million, thanks to a crackdown by the Zimbabwe Revenue Authority, but the fact that most of the income came from value added tax showed that consumption was still high while production remained low, which could stoke inflation.
The annual inflation rate slowed to 5.3 percent in June after accelerating for the first five consecutive months of this year. Biti expects the price index to end up the year at 4.5 percent but analysts see a higher number.
Post published in: News