21 October 2012

Zimbabwe: Budget Projections Unrealistic - IMF

PREDICTIONS that Zimbabwe's economy is set to grow by 8,9% in 2013 as announced by the Minister of Finance, Tendai Biti, earlier this month has been rejected as an overestimate by the International Monetary Fund (IMF).

Biti will present the US$3,8 billion 2013 budget on November 15.

In a pre-budget paper delivered on October 5 2012, Biti forecasted the economy was set to grow by almost 9%, but the IMF has said Zimbabwe's growth in 2013 could be 5%.

In its Article IV Consultation Report released last month, IMF warned that the combined effect of a civil servants' salary increase, lower diamond revenues and an election next year, could see Zimbabwe facing another liquidity crisis and a significant increase in domestic debt.

"If nominal wages were increased by 20% for civil servants in 2013, employment costs would increase by about 2% of GDP. This, along with further shortfalls in diamond revenue would undermine service delivery and critical social and capital spending," IMF said.

Biti however shot back at criticism saying the figures contained in his pre-budget strategy paper were valid and that forecasting growth rates was not a guessing game.

"It's a scientific document, you need to read the paper, it's not just guesswork," Biti said on Wednesday last week.

In his pre-budget paper,Biti argued that a 8,9% growth level could be achieved if key factors such as political stability, fiscal prudence and an improvement in electricity and water supply were achieved over the next three years.

Biti upbeat

Biti said the macro-economic and budget framework projections for the period 2013-2015 would be underpinned by a stable political and economic environment, adherence to the cash budgeting principle and continued use of multiple currencies.

"Improved supply capacity of such key enablers as power, water and transport, coupled with stability in prices, will also be critical for guaranteeing domestic economic production.

"Against this background, GDP growth in 2013 is projected at 8,9%, while inflation remains around 5%," Biti said.

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