High hopes for budget

Finance Minister Tendai Biti will present his spending plans to parliament at the end of this month at a time when a rosy outlook at home – thanks to rains boosting agriculture output– is being tempered by concerns about heightened political acrimony and the continuation of cash budgeting amid donor fatigue to bankroll the unity government.

Zimbabwe suffered the triple shock of a bloody post-election crisis in 2008, a drought and a financial crisis characterised by hyperinflation, forcing policy-makers to try to jumpstart growth by abandoning the worthless local currency and adopting use of multiple foreign currencies as legal tender last year.

“Important to watch will be the manner in which minister Biti positions the budget in the larger picture of macroeconomic stability,” said political and economic commentator, Ronald Shumba. After suffering a decade of negative economic growth, officials expect the country to post 8.1 per cent growth this year after registering 5 per cent growth in 2009. But the rate is still a long way from its medium-term target of attaining and sustaining double digit growth per year.

“Considering the improved growth outlook for 2010 and beyond, the situation in which this budget will be presented is considerably more benign than last year,” Shumba said. “Nevertheless government is expected to be careful in its optimism, striving to harbour the progress that has been made in re-establishing economic growth in light of the fragilities of the re-emergence of lack of political consensus and adverse impact of elections on the economy.”

Biti will likely increase spending on development slightly while trying to lower the deficit, economists say. The minister has said Zimbabwe’s US$7billion external debt has been his biggest headache, because Bretton Woods institutions have refused to extend lending until Zimbabwe cleared those arrears, money the GNU doesnt have. Biti has said the debt is interfering with the government’s borrowing plans.

Tawedzerwa Moyo, a Harare-based economic commentator said the minister may still face pressure to make available enough funds for all the required spending, especially agitating civil servants. The 260,000 strong civil service already gobbles 60 per cent of budget expenditure, yet the majority of them are on a US$200 salary. The National Association of Non-Governmental Organisations (NANGO), working with the Zimbabwe Civil Society Budget Coalition, has urged Biti to stick to the dictates of the Abuja Declaration that at least 15 per cent of the national budget expenditure be allocated to the Ministry of Health and Child Welfare, and to ensure that at least 20 per cent of the national budget should be channelled towards education, as the Dakar Declaration states. He also needs US$200 million to bankroll the referendum on a new Constitution and the general election expected next year.

Biti has to also do a regional balancing act amid accusations of favouritism in the allocation of funds. Biti, who has consulted widely on the budget, is expected to announce some form of additional stimulus, despite warnings by the fund that his budget should not exceed US$2.5 billion. Biti says he expects the economy would continue to mainly rely on internal funding. “We have to depend on our own resources,” he said. “We are on our own.”