Review to confirm economic gloom: Biti

HARARE – Finance minister Tendai Biti last week predicted a “gloomy” mid-term economic review which will reflect how economic growth has slowed down during the second quarter of the year.

Biti said he expected to present probably his last mid-term fiscal policy under the inclusive government early this week after postponing it to attend to MDC issues ahead of the elections scheduled for July.

“I had to postpone the mid-term fiscal policy (this week) to attend party matters as secretary-general (for Tsvangirai’s MDC) so that we have harmonised elections whose results would steer the economy forward,” Biti said.

“In terms of economic growth as a country we lost three points during the first quarter of the year, you will be surprised or shocked rather by what I will present next week … My point is we should not destroy our economy because of an election which happens for a day,” he said.

Analysts said the fiscal policy review needed to focus on the reduction of government expenditure although most conceded Biti faced a nearly impossible task achieving that goal since the bulk of the country’s tax revenues were going towards civil servants’ salaries.

They said Biti should also consider the resuscitation of functional money markets to ease the liquidity crisis adding this could be through trade-able bills as well as restoring the central bank’s lender of last resort function.

In November last year, Biti presented a $3,8 billion budget describing it as the most difficult to construct in the short life of the inclusive government.

He said numerous downside risks, including potential political instability, threatened his budget objectives

“Multitude of challenges are facing the economy and requires a fundamental re-think of the state, economics and development in Zimbabwe,” he said.

Biti revised Gross Domestic Product growth for 2012 to 4,4 percent from the 5,6 percent he had set during his mid-term fiscal policy review in June last year after the initial 9,4 percent forecast.

Some analysts felt Biti could further revise down this year’s economic growth which had been projected at about five percent.

In April this year, Biti said Zimbabwe’s economy could have shrunk by up to three percent during the first four months of the year due to political uncertainty.

“The significant and disturbing position that is coming out from our analysis of the economy in the first four months of the year is that there is obvious evidence of shrinkage in the economy,” he said.

“There is clear evidence of economic decline and the elephant in the living room, self-evidently remains the issue of elections.

“I think the sooner there is clarity of the dates, clarity on the processes, clarity on the funding, we should see the return of better business confidence,” said Biti.

The Finance minister noted that businesses are just hanging in there, unsure of what to do given the uncertainty pertaining to the lack of clarity on the exact date of the election.

“I have absolutely no doubt that our quarterly Gross Domestic Product growth rate could have been minus two or three percent.”

A survey carried out by Treasury at the just-ended Zimbabwe International Trade Fair, Biti said indicated that manufacturing sector firms had recorded huge declines and near stagnation in production volumes compared to those recorded last year.

This, he said, was triggered by low agricultural output and limited long term financing as well as general un-competitiveness

He said the reduction of broad money supply, which declined to 10,4 percent in March from 12,91 percent during the previous month, had also shown signs of a weakening economy.

Biti said economic contraction had also been triggered by an unfavourable balance of payment position which has seen imports nearly trebling exports.

Official figures show that out of the $263 million collected in revenue, $199 million went to employment costs leaving the government with limited fiscal space.

He attributed April’s slowdown in annual inflation to depressed demand due to liquidity constraints and the depreciation of the rand. — With Newzimbabwe.com

Comments (1)

3b$ only we need to improve but only if the political environment is conducive ti conduct business without fear of losing investments.

obama4eva - 16 July 2013

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