Post date: Dec 20, 2013 12:50:28 PM
Zimbabwe's finance minister unveiled a 4 billion US dollar budget that sees agriculture and mining driving faster growth, royalties on diamonds rising to 15 percent but analysts say the growth projections are ambitious.
HARARE, ZIMBABWE (DECEMBER 19, 2013) (REUTERS) - Zimbabwe's economy should grow 6.4 percent in 2014, a big jump from the 3.4 percent projected for this year, backed by mining and agriculture, finance minister Patrick Chinamasa said on Thursday (December 19). Analysts, however, said the figure was very ambitious.
Chinamasa spoke as he unveiled the 2014 budget at parliament. He also announced plans to raise the tax on mining companies for diamond sales and said the government was planning a new levy on unprocessed platinum as part of efforts to force platinum mines to set up a refinery in the country.President Robert Mugabe, who won a disputed election in July, is struggling with an economy that is shedding jobs, failing to woo foreign investors and racked by electricity shortages.
After growing at higher rates between 2009 and 2012, the economy slowed down this year after a mid-season drought and while businesses and investors held out for the July 31 election.
The U.N. World Food Programme has said the country faces its worst food shortages in four years, with up to 2.2 million people needing food relief.
Analysts said the country could miss its growth target next year given global commodity prices are expected to be depressed, the country is attracting few foreign investors and farmers are behind in their planting this season.
"Chances of the present government to fulfil and at the same time achieve the framework and the targets they have espoused are very slim, given the nature of the budget, which has just been announced. A 4.02 billion budget to be able to sustain a more than 7 percent growth in terms of GDP annually is quite very impossible and impractical," said Chrisopher Mugaga, an economic analyst.
Foreign investors are also sceptical of Harare's policies, including the controversial black economic empowerment drive that forces foreign-owned firms to sell majority shares to blacks.
The policy, known locally as indigenisation will not change, Chinamasa said.
Former finance minister and Secretary General of the opposition party Movement for Democratic Change (MDC), Tendai Biti, speaking days before the unveiling of the budget, said the growth projections were not sustainable due to low revenues.
"As far as we are concerned, it's going to be a Mickey Mouse budget, for the simple and good reason that there is no revenue to back it up. In the era of cash budgeting, you could be rest assured that there would be revenues that can finances the budget even if they would come at a later date, but in this situation where the wage bill alone can't be financed from the revenue, you are going to have a totally unfunded budget," said Biti.
Chinamasa repeated that the government would continue to use the U.S. dollar and South African rand and could adopt other currencies.
Since the country ditched the Zimbabwe dollar in 2009, the country's central bank has lost its ability to set interest rates and lend to struggling smaller banks.