Budget battle: Biti outlines 2012 plan

As Finance Minister Tendai Biti prepares the 2012 budget, he faces the challenging task of finding more ways for government to earn money while taming its profligate spending.

Tendai Biti
Tendai Biti

Biti this week launched the 2012 budget consultation programme that will see a series of meetings with various groups of Zimbabweans willing to give to government future spending plan. The meetings are scheduled to run countrywide until November 10.

Biti will table his budget proposals in Parliament on November 16.

On Tuesday, Biti will present to Parliament a strategy paper outlining the fiscal framework and the size of the budget.

He told a news conference last week that the strategy would guide ministers to present pragmatic requests – rather than the extravagant claims some ministers made in the last budget.

Given the current political landscape and with elections due next year or in 2013, carrying forward the desired fiscal reforms will be tough.

"We will need to monetise the GPA. The Constitution-making exercise, the referendum, the commissions that are being formed are an obligation on the 2012 budget," Biti said.

H was confident of meeting the 2011 fiscal targets.

"We have projected a year-end growth rate of 7.7 percent, inflation below 4 percent, revenue targets of US$2.7billion. Expenditure, that is the nightmare," Biti said.

With the robust growth momentum, the economic outlook remains buoyant. However, the downside risks mar the optimism. Rising government spending is the minister's predominant worry, the recent unbudgeted civil servants salary increase has increased government's employment costs from 51 percent of the 2011 $2.7billion budget to 61 percent.

"What this means is that for every $1 we get, we are spending 67 cents on paying civil servants salaries and leaving only 33 cents for other things like hospitals, schools, energy, social welfare etc. We are allocating 67 cents to 237 000 civil servants and 33 cents to the remaining 11million people that also include widows, people living with HIV etc," Biti explained.

Instead of increasing expenditure on social services, Biti says government officials have blown $40million on foreign travel so far.

He says he has no power to reign in this penchant for travel, including that of President Robert Mugabe, which is exerting huge pressure on the fiscus.

Against this backdrop, the government’s commitment to bring down the fiscal deficit is now impossible, and Biti projects that by year-end Zimbabwe will have a deficit of $700million.

"We have a debt overhang. We have an unverified debt of $7.1billion which is 90 percent of GDP," he said.

The uncertain global economic recovery, scant capital inflows, unemployment, and slow industrial growth are some of the difficult issues that Biti has to contend with.

On the one hand, government spending would remain high on account of subsidies and various social sector schemes and on the other, it would not have the comfort of the revenue windfall that is being pumped by Bretton Woods institutions into other African economies.

He said at the recent World Bank Spring meetings, he was astounded to see that Zimbabwe had become the only stagnant economy amid average 7 percent growth rates in other African states, including fragile states.

"If you go to fragile states like Somalia, Liberia, Sierra Leonne, even South Sudan with one kilometre of tarred road, there is massive capital formation because the governments there are finding a common vision that takes the country forward," Biti said.

"Unfortunately that is not happening in Zimbabwe. There is a kwashiokor of common vision. And the ordinary people of Zimbabwe are suffering."

Biti said the 2012 budget would be underpinned by realism and pragmatism.

"We have to live within our means. As we have been constantly preaching in the past three years, we have to eat only what we have killed," Biti said.

"There has to be fiscal discipline, realism and pragmatism. The budget will also have to be relevant to the needs of the people of Zimbabwe. Our people want to be economically active, they want jobs. We will therefore pay special attention to the issue of jobs in this budget."

The budget will also focus on social safety nets.

"A relevant budget will also take into account the fundamental societal deficit in our country – the massive numbers of people living below the poverty datum line, the huge population that is wallowing in poverty. As in previous budgets we will put special emphasis on education," he said.

He repeated his mantra that the biggest problem affecting the economy is politics.

"The misalignment of politics, tensions in the inclusive government, the conflict of public positions on key issues such as indigenisation, farming and so forth, the absence of a common vision, and the conflict between those who want to carry the country forward and those who are shareholders of disorder and chaos – that is the No. 1 problem," he said.

67% spent on 237,000 civil servants

33% spent on 11 million people

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