FINANCE minister Herbert Murerwa yesterday painted a grim picture of the economic situation, saying the economy would shrink by 13,2% this year, while inflation would surge t
o 600% next month, reaching 700% early next year.
Presenting a $7,75 trillion budget to parliament, Murerwa said the economy was in a deep crisis. He projected an 8,5% economic contraction and a 7,5% budget deficit next year.
“The country has once again experienced another year of severe socio-economic hardships,” Murerwa said. “These hardships have manifested themselves in rising inflation, erosion of real incomes, critical foreign currency shortages, decline in savings and investment, capacity utilisation, company closures and high unemployment. The HIV/Aids pandemic has compounded the situation.”
However, Murerwa said inflation was “our number one enemy, whose containment requires total and unwavering commitment and collaboration of all stakeholders”.
“The economy is estimated to contract by 13,2% this year and inflation to peak at about 600% by December,” he said.
“Inflation will initially rise to above 700% during the first quarter of 2004 due to the momentum it has gathered this year. However, it is my projection that inflation will start to dissipate thereafter in response to both monetary and fiscal measures to be implemented in 2004.”
Zimbabwe’s inflation rose to 525,8% in October from 455,6% in September amid fears that it would soon hit the 1000% mark.
“In order to arrest rising inflation and reduce it initially to double-digit levels and ultimately to single digit figures, government will rigorously implement fiscal and monetary stabilisation measures,” Murerwa said.
“Central to achieving macro-economic stabilisation will be fiscal discipline and increased focus on the efficient use of resources, aimed at attaining the desired target inflation levels for the economy.”
In line with promised fiscal and monetary measures, Murerwa said government “will pursue an interest-rate policy which will encourage growth on one hand, while fighting inflation on the other through discouraging speculative and consumptive borrowing.”
Murerwa said he anticipated nominal gross domestic product (GDP) for 2004 to be $24,63 trillion.
“Given a revenue of GDP ratio of 28%, revenues will be about $6,9 trillion. Total expenditures will amount to $8,74 trillion giving a deficit of $1,85 trillion, which translates to 7,5% of GDP – a standstill position compared
2003 in the absence of significant international inflows.”
However, the opposition Movement for Democratic Change (MDC) said Murerwa’s budget was a “financial planning disaster”.
“Murerwa’s budget is an indictment of Zanu PF’s rule. It shows beyond doubt that this government has failed. It is a populist budget, underpinned by dishonesty and hypocrisy,” the MDC said.
“It is dishonest in that it fails to address three fundamental issues: exchange rate, inflation and negative real interest rates.”
The MDC said the budget, whose blueprint and key statistics were missing, was cloaked in secrecy to conceal the depth of the economic crisis. It said the budget was also tinged with deceitful political statements and misrepresentations.