ZIMBABWE’S economy is set to grow in 2006 for the first time in six years, Finance Minister Herbert Murerwa predicted yesterday, but analysts said this offered no hope to the country’s millions stuck in poverty.
FONT face=”Verdana, Arial, Helvetica, sans-serif”>Zimbabwe, once the breadbasket of southern Africa, is reeling from its worst economic crisis since independence from Britain in 1980.
The crunch is widely blamed on mismanagement by President Robert Mugabe’s government – especially the seizure of white-owned farms, which has led to the collapse of the agricultural sector, formerly the mainstay of the economy.
Unveiling his 2006 national budget proposals to parliament, Murerwa said gross domestic product (GDP) growth was forecast at between 2 and 3,5% in 2006, against a 3,5% contraction this year.
“Growth will be driven mainly by agriculture, manufacturing, mining and tourism,” Murerwa said, drawing shouts of derision from opposition legislators. Last year the government said the economy would start to expand again in 2005, predicting 5% growth.
The country has suffered six years of recession, with output contracting by more than a third. A combination of foreign currency shortages and the drought has forced the country’s manufacturing sector to operate well below capacity.
Unemployment is estimated at over 70% and inflation is running above 400%. Economists said the budget would do nothing to solve the economy’s main problems of unemployment and growing poverty.
“It is a highly technical budget, it is really fiddling around the edges of the central problem, not really tackling any of the critical issues,” said Tony Hawkins, a professor at the University of Zimbabwe.
“Unemployment is continuing to rise and people are getting poorer. I do not think this budget is going to make an awful lot of difference to Zimbabweans, I think if anything they are gonna find very high inflation from the measures announced.”
He cited Murerwa’s instruction for state companies to charge market prices for services and his advocacy for the removal of price controls for all but the most essential basic commodities.
Murerwa promised to further liberalise the foreign exchange market after the government introduced a partially managed float in October, which has seen the Zimbabwe dollar plunge 63% against US dollar, but boosting exporter viability.
The finance minister also predicted that the budget deficit would dip to 4,6% of GDP in 2006 from the 5% forecast for this year, which could see the government moving from the traditional supplementary budgets.
This means that government departments will not be allowed to spend outside their allocated budget amounts.
Murerwa said the spending constraints required to achieve the budget deficit target should also result in inflation slowing to 80% by the end of that year.
Murerwa offered relief for Zimbabweans burdened with one of the highest rates of income tax in the world, but analysts said most of the benefits would still be swallowed by inflation, which soared to 411% in the year to October.
Mugabe (81), in power since independence, says Zimbabwe’s economy has been sabotaged by opponents of his policy of seizing white-owned farms for redistribution to the landless black majority. – Reuter.