Zimbabwe sees higher 2011 growth but no foreign aid – (Read Full Budget Statements)

HARARE – Zimbabwe expects its economy to grow nearly 10 percent next year as the key mining and agriculture sectors expand, and will rely largely on domestic revenue to fund its budget as donors hold back aid.

Read full 2011 Budget Statements 

The southern African country’s economy expanded for the first time last year under a unity government led by President Robert Mugabe and bitter rival Prime Minister Morgan Tsvangirai, but investors are still unhappy about Mugabe’s policies.

GDP growth is seen at up 9.3 percent next year from 8.1 percent in 2010 and 5.7 percent last year, Finance Minister Tendai Biti said in a televised budget speech on Thursday.

"The economy is set to grow by 8.1 percent this year, compared to 5.7 percent in 2009 on the back of growth in mining by 47 percent and agriculture at 33 percent," Biti said.

"In 2011 we anticipate that GDP will grow by 9.3 percent to $8 billion. Our initial projections were that our GDP would be $5.9 billion in 2011 … we are ahead of schedule."

Biti presented the 2011 budget against the backdrop of scant aid flows, with donors withholding funds crucial to boost an economy emerging from a decade of contraction mainly over Mugabe’s seizure of white-owned farms for blacks.

Investors have also been rattled by Mugabe’s drive to transfer control of all foreign firms, including mines and banks, to locals.

Analysts said Biti’s growth projections were unrealistic.

Zimbabwe had produced 2.7 million carats of diamond this year and sales had raised $85 million from two auctions. Diamond production is expected to increase to 4 million carats in 2011.

ROYALTIES ON PRECIOUS METALS TO RISE

The government would increase royalties on diamond sales to 15 percent from the current 10 percent, while those on gold and platinum would go up to 4.5 percent and 5 percent respectively from 4 percent.

"Despite the increase in international metal prices, royalties collected from precious metals amounted to a paltry $20.7 million from sales of $593.8 million, during the period January to September 2010," Biti said.

Zimbabwe, which has grappled with chronic power shortages for the past decade, would spend $135 million to raise its power generation capacity to 1,650 MW in 2011 from current supply of around 1,000 MW.

"It is our intention to raise power generation in 2011 to 1,650 megawatts by prioritising the rehabilitation of the Kariba and Hwange stations as well as the small thermal stations in Bulawayo, Harare and Munyati," Biti said.

Annual inflation, which slowed to 3.6 percent year-on-year in October, should accelerate to 4.8 percent by year-end.

 Zimbabwe, which has grappled with chronic power shortages for the past decade, would spend $135 million to raise its power generation capacity to 1,650 MW in 2011 from current supply of around 1,000 MW.

"It is our intention to raise power generation in 2011 to 1,650 megawatts by prioritising the rehabilitation of the Kariba and Hwange stations as well as the small thermal stations in Bulawayo, Harare and Munyati," Biti said.

Annual inflation, which slowed to 3.6 percent year-on-year in October, should accelerate to 4.8 percent by year-end.

 – Reuters