PREVIEW: Zimbabwe budget aims to cement recovery
HARARE, – Zimbabwe's Finance Minister Tendai Biti presents his 2011 budget on Thursday but paltry government revenues and aid flows give him little room for manoevre and a big overhaul of the economy is beyond his remit.\r\n
The 2011 budget is expected to rise to $2.5 billion from $2.25 billion this year, reflecting a rebound in growth since the fractious government of President Robert Mugabe and Prime Minister Morgan Tsvangirai dollarised the economy last year.
But donors and investors are still withholding funds and up to 70 percent of government receipts go on the state payroll, giving Biti little ammunition to fire up the economy.
Investors dislike Mugabe’s policies such as land seizures and his drive to transfer control of all foreign firms to local blacks.
More telling are the frequent wrangles in the unity government over policies, senior appointments, the pace of reforms and sanctions imposed by Western governments on Mugabe and his inner circle.
"There’s very, very little that he can do alone and in the framework of a budget. The fundamental issues affecting the economy are not within his responsibilities but fall under national policy. He is handcuffed," economic commentator Eric Bloch said.
"We have got to demonstrate we have political stability and that the unity government is working."
Biti has projected 8.1 percent growth this year and 10 percent in 2011 due to a revival of mining and farming, although the IMF is far less optimistic, forecasting 2.2 expansion this year.
The economy contracted by as much as 40 percent from 2000 to 2008 due to mismanagement under Mugabe that culminated in hyperinflation of 500 billion percent in 2008.
Although inflation is now in single digits, analysts believe the country needs at least $10 billion to repair its dilapidated roads, power stations and water works.
Zimbabwe’s main business organisation, the Confederation of Zimbabwe Industries (CZI), says an empowerment law seeking to transfer control of all foreign-owned firms to blacks was a threat to the economy and investment.
"Business needs clarity on the indigenisation process as this is negatively impacting on both foreign and local investment," it said in a pre-budget statement. "Politics is still the biggest threat to economic recovery."