14 November 2012

Zimbabwe: Biti to Unveil Poll Budget

Photo: Cliff Owen/IMF
Tendai Biti, Zimbabwe's finance minister.

FINANCE Minister Tendai Biti is today expected to unveil his 2013 National Budget that is largely expe-cted to focus on harmonised elections next year, raising the prospect of a significant fiscal deficit in the abse-nce of balance of payments support.

Biti, whose budget is likely to be the last under the inclusive government to be dissolved next year, has indicated in the past that significant fiscal pressures against the backdrop of a worsening liquidity crisis could force government to seek external funding for the plebiscite.

The country is expected to hold a referendum on a new national constitution this year, which is to be followed by elections probably in June.

The current budget is already under significant stress, having been slashed from US$4 billion to US$3,64 billion due to what Biti said was "an unacceptable state of underperformance . . . characterised by low business and investor confidence, some disequilibrium in the economy, little growth in employment, declining social indicators and generally a lackadaisical business-as-usual mentality".

With little room for manoeuvre, Zimbabwe is likely to reach out to international donors to bankroll elections, and even the referendum because of lack of capacity for internal funding of the plebiscites.

Market watchers said Biti could allocate funding for elections in his 2013 National Budget just as a symbolic gesture.

The International Monetary Fund has already advised government to seek offshore support to avoid a fiscal haemorrhage due to funding of elections and the referendum.

Against expected revenue inflows, which are likely to dwindle next year due to apprehension within business over potentially destabilising elections, Biti's budget could incur a huge deficit.

The budget had a cash deficit of 0,6 percent of Gross Domestic Product (GDP) in 2011, with domestic arrears accumulation of about one percent of GDP. The deficit is likely to be higher this year due to unbudgeted for bonuses as well as other costs.

This year's budget had already been compounded by an increase in employee allowances and unbudgeted recruitment. Fiscal stress was aggravated by underperforming diamond revenues in the first half of 2012.

Mines Minister, Obert Mpofu told delegates at a diamond conference in Victoria Falls this week that expected revenue from diamond sales would decline significantly due to sanctions.

Biti's budget will be unveiled three days after government released a review of its Medium Term Plan, which in essence was a catalogue of the inclusive government's failures on the economic and political fronts.

Government is expected to fund the Zimbabwe Electoral Comm-ission (ZEC), which has previously complained of underfunding to enable it to oversee a smooth electoral process next year.

Prime Minister Morgan Tsvan-girai has previously warned of a tough year ahead due to a litany of constitutional obligations the government faces in 2013, at a time of dwindling finances.

Biti could not be reached immediately for comment, but ZANU-PF secretary for information and publicity, Rugare Gumbo, said this time around, the minister cannot afford to exclude an allocation for polls.

"As a party, we are saying that money for elections is there. The minister will have to also provide for the referendum," said Gumbo.

ZEC says harmonised polls would require nearly US115,4 million, while the referendum requires nearly US$105 million.

The current budget comes at a time when implementation of some government programmes has stalled due to late disbursement of funds by Treasury as a result of poor revenue inflows, especially from diamond sales.

Policy inconsistencies, contradictions and uncertainties within the inclusive government were also blamed for the country's failure to attract meaningful investment and access to credit lines, resulting in increased country risk and cost of doing business in Zimbabwe.

Although there is consensus among the country's governing parties that the next polls are due in 2013, there are differences over the month they must be held.

ZANU-PF insists that people would head for polling booths in March, while the Movement for Democratic Change formations insist that elections should be held in June.

However, a real threat of another sham poll looms as key reforms, including those stipulated in the Global Political Agreement, remain unfulfilled mainly due to ZANU-PF's intransigence, which some obse-rvers have attributed to President Robert Mugabe's hard line stance on key issues.

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