FINANCE minister Herbert Murerwa painted a gloomy economic outlook in the annual budget yesterday and critics said the government had run out of ideas for bringing the economy back from the brink of c
Zimbabwe already faces record unemployment, soaring inflation and food shortages. Murerwa told parliament the economy would contract by a sharper than expected 13,2% in 2003 and by another 8,5% in 2004.
He said the central bank would introduce measures on foreign exchange management, interest rates and money supply to try to tame annual inflation of 526% but that Zimbabwe’s “number one enemy” would hit 700% early next year.
Critics said Murerwa had presented no concrete new proposals and that this was testimony to the government’s lack of political will to tackle the huge economic problems head on.
“It is a very disappointing, standstill budget which fails to address the deep-seated macroeconomic problems facing the country,” said Tapiwa Mashakada, shadow finance minister for the main opposition Movement for Democratic Change (MDC).
“The government has run out of solutions for the economic quagmire because there is no political will to tackle the macroeconomic fundamentals,” Mashakada told Reuters.
Zimbabwe is now in its fifth year of recession. Murerwa said the budget deficit wound remain 7,5% of gross domestic product in 2004, and pledged to introduce value-added-tax at the start of the year.
He said the Zimbabwe Reserve Bank would introduce the measures on foreign exchange management, interest rates and money supply in mid-December.
As Murerwa presented the 2004 budget to parliament, residents of Harare went about their normal business, ignoring a call by the main Zimbabwe Congress of Trade Unions (ZCTU) for a two-day national strike to protest against the economic crisis.
The ZCTU and other government critics say skewed policies by President Robert Mugabe’s government, including its seizure of white-owned commercial farms for redistribution to landless blacks, have hit the economy and driven away key foreign donors.
Analysts say the withdrawal of international aid, which used to shoulder the bulk of Zimbabwe’s budget, has forced the government to borrow heavily from the domestic market to fund expenditure, crowding out the private sector.
“The projected low levels of external inflows means that the bulk of the (2004) deficit of $1,85 trillion will have to be financed domestically,” Murerwa said.
He offered nothing concrete to end the foreign currency crunch which has plagued the country since 1999, and made no mention of a currency devaluation which companies say is necessary to breathe life back into the ailing export sector.
The Zimbabwe dollar has been officially pegged at 824 against the US dollar since February but is trading at up to 6 000 on a thriving black market.
Exporters have to surrender half their earnings to the central bank at the official rate, but buy scant hard currency at the illegal level to import crucial raw materials.
Mugabe dismisses charges that he has mismanaged the economy. The 79-year-old veteran leader says his domestic and foreign opponents have sabotaged the economy to pay his government back for the land seizures.