10 October 2012

Zimbabwe: WB Economists in Zim for Budget

Photo: IRIN
Hope in Harare.

THE World Bank (WB) has dispatched a team of eight economists led by Swiss national Nadia Piffaretti to provide technical assistance during the formulation of Zimbabwe's 2013 National Budget, The Financial Gazette's Companies & Markets can report.

The budget will be presented on November 15, 2012 and stakeholder consultations have already begun.

The WB team, which arrived in Harare two weeks ago, has held consultations with ministers and government officials, in addition to independent economists.

"We have a team of eight economists from the World Bank who are assisting the Ministry of Finance with preparations for the budget," a source in the Ministry of Finance said this week.

The WB assists member countries in a number of technical areas aimed at boosting economic growth and alleviating poverty.

The Bretton Woods institution, however, halted support to Zimbabwe during the crisis years, taking a cue from its sister institution, the International Monetary Fund (IMF), after Zimbabwe ran into protracted arrears on its loans to the two institutions.

The team has been looking at the tax system and assessing the country's progress towards meeting the Millennium Development Goals, among several issues, sources said.

"Their presence in this market is helping," said Takunda Mugaga, head of research at advisory firm, Econometer Global Capital, who has met the WB economists.

"They will study the economy and give their feedback and advice," he added.

This year's budget comes as the country's economy has started showing signs of slowdown following poor agricultural production blamed on erratic rainfall and negative investor sentiment brought about by intensifying political rhetoric over polls expected early next year.

The WB economists are expected to guide the Ministry of Finance on strategies to overcome the economic decline.

Zimbabwe's economy grew at a rapid rate of 9,6 percent in 2010 and 9,4 percent in 2011 as the country rebounded following a long recession blamed on mismanagement.

In a review of Zimbabwe, the IMF last month said the growth would slow down in the medium-term to an average of about four percent.

The IMF said power generation and supply weaknesses and tight liquidity conditions could pose even further problems for Zimbabwe's economy.

It said the country's current account deficit was expected to narrow to about 20,5 percent of Gross Domestic Product (GDP), estimated at about US$10 billion, in 2012, as a spike in imports in 2011 is reversed and exports improved.

The IMF warned that the country must take steps to retire its unsustainable debt, estimated at about US$10,7 billion.

This debt was estimated to be 113,5 percent of GDP at the end of 2011.

"The large debt overhang remains a serious impediment to medium-term fiscal and external sustainability," the IMF said.

It said two salary increases for civil servants since 2011 had increased employment costs by 22 percent, and was compounded by an increase in employee allowances as well as unbudgeted recruitment.

With elections expected in March, 2013, the IMF said there were concerns about a repeat of the violence that characterised the 2008 presidential poll, further hurting investor confidence on Zimbabwe.

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