20 November 2012

Zimbabwe: Govt Needs U.S$4 Billion Stimulus Package - Biti

ZIMBABWE urgently needs US$4 billion to reinvigorate sluggish economic performance and address some of its key infrastructure deficiencies, Finance Minister Tendai Biti has said.

Minister Biti was speaking in Harare last week at the Confederation of Zimbabwe Industries workshop, a day after presenting his 2013 National Budget statement, which he admitted, falls far short of Government's financial requirements.

He said there was needed to invest in gross capital formation namely roads, rail, air and energy infrastructure to guarantee sustainable economic growth and development.

Speaking at the same occasion CZI president Mr Kumbirai Katsande wanted to know how Treasury would fund the many needs in the Budget with a US$3,8 billion resource envelope.

Minister Biti said Government had concluded funding arrangements with the Afreximbank for a second batch of US$70 million under the Zimbabwe Economic and Trade Revival Fund.

Last week, Treasury also earmarked US$40 million for the second phase of the Distressed and Marginalised Areas Fund and US$20 million to support SMEs, but this remains insufficient.

This comes against a backdrop of a poor economic outlook after projected economic growth was reduced from 5,6 to 4,4 percent, having initially been seen at 9,4 percent in November last year.

Already, industry capacity utilisation has dropped from an average of 57,2 percent last year to 44,5 percent while production targets were missed in agriculture, a key economic anchor.

Lack of funding also weighed down growth.

"What Zimbabwe wanted was actually a stimulus package; that is what we needed.

"We needed a stimulus package of at least US$4 billion.

"But we could not do that, nobody could help and of course we can not print US$4 billion, we do not have the capacity.

Minister Biti expressed hope the country would have "a good election next year" and has the decency to persuade its foreign partners through Zimbabwe Coalition Debt and Development.

With such an arrangement in place, the country would then seek to raise the stimulus package to spur economic growth above 5 percent the minister has projected for a gloomy 2013.

Zimbabwe owes external creditors a total of US$10,7 billion and 75 percent of that is already in arrears and standing in the way of huge funding from international lenders.

It is against this scenario that Government has spent time and resources working on the Zimbabwe Accelerated Arrears Clearance and Debt strategy to access external funding.

"We have made so much progress on ZAADS that negotiations are at an advanced stage and we should be able to conclude a memorandum of understanding before the end of this year.

"But the bottom line is that we need capital in this economy and we should create conditions for attracting (foreign direct) capital in this country," Minister Biti said last Friday.

Government is also set to engage the International Monetary Fund over a staff monitored programme on implementation of agreed macro-economic reforms in Zimbabwe.

Such co-operation backed by clearance of the country's arrears with the Bretton Woods institution would result in the normalisation of relations leading to new forms of financial assistance.

Minister Biti said the 2013 Budget seeks to address structural reforms such as the dual enclave economy, old accumulation models, broken down social contract, low foreign capital, industry competitiveness, poverty, regional integration, debt overhang, cyclical politics and lack of a shared vision.

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