Biti forecasts 40,5% budget deficit

FINANCE Minister Tendai Biti forecast a budget deficit of 40,5% of gross domestic product next year.

Government spending will reach $2,25 billion, while revenue increases to $1,44 billion, leaving a shortfall of about $810 million.

Biti hinted that the deficit will be funded by foreign aid or by drawing down on the $US510 million the country received from the International Monetary Fund (IMF).

“In 2010 we are working on the assumption that the gross domestic product will grow by 7%,” Biti said on Wednesday.

Biti increased the growth forecast for this year from 3,7 to 4,7%, compared to a 10,9% decline in 2008.
“Sixty-three percent of the budget will be spent on employment costs and we will spend only 5 percent on capital projects.”

He added, “This is on the back of improved performance in agriculture, mining, manufacturing and tourism.”

Biti said the 2010 budget was a “difficult budget to craft because of limited fiscus space against huge demands and high expectations from Zimbabweans.”

Inflation was projected to end the year at -5,5% and to reach 5,1% in 2010.

Biti said there was relative stability in the performance of the economy but was quick to add that an improved political situation built on the full implementation of the Global Political Agreement (GPA) can better Zimbabwe’s fortunes.

He noted the improved performance in agriculture up 10%, mining up 2% anchored by 14,6% gold output, manufacturing 8% and tourism 6,5%.

In agriculture, tobacco had realised 56 million kg of which 42 million kg were the actual harvest in 2009 with the rest being carryovers from last harvest. Maize production was at 1,2 million tonnes.

In manufacturing capacity utilisation had grown to average between 30% – 80% from about 10% – 80% capacity utilisation was achieved in drinks and tobacco, 35% foodstuffs, textile and clothing 45%, paper manufacturing 32%, chemical 50% and non metalic 50%.

The banking sector had seen an increase in deposits up to US$1 billion in October with long term deposits at US$5,8 million. Advanced loans were at US$501million as at October giving a loan-to-deposit ratio of 50% against the generally accepted ratio of 80%.

The country’s debt remains unsustainable at US$5,7 billion.

On fiscal developments Biti said revenue collected was $685 million against a target revenue of US$789,8 million and expenditure was US$40,8 million. Of the US$685 million collected VAT accounted for 39% or $268,9 million, Customs duty 26% or $179.2 million, PAYE 15% US$104,4 million Corporate tax 4,4% or US$25,6 million and Excise 7% or US$44,6 million.

Of the 5% capex US$20 million was spent on vehicles and furniture while capital projects accounted for less than $10 million.

Of the cumulative expenditure of US$640,8 million the bulk (63%) went to employment costs. Civil service 43%, pensions 12% and other salaries 1%. Capital expenditure accounted for only 5%, vote of credits 2%, Zimra retentions at $41 million was 7% of the budget. About $28 million was used on foreign travel as a government.

Biti also projected a 40% improvement in mining, 10% in agriculture in 2010.

In the 2010 budget line ministries, government departments and parastatals had demanded a total of $12 billion against the projected revenue of $1,44 billion.

He also noted the vote of credit in 2009 was large because of pledges and the $210 million from the SDRs.

Biti also had an early Christmas for Zimbabweans who continue to import used vehicles from outside who would now be paying less in terms of customs duty.

With effect from January 1 next year, import duty for half tonne pick up trucks will drop from 40% to 25% while vehicles with an engine capacity below 1 500cc will also attract duty of 25%, down from 40%.

Biti further increased the rate of excise duty on spirits from 20% to 40% with effect from January 1 2010.
Infrastructure Power — about $380 million is needed to restore normal power supply but Biti allocated $52,6 million for regeneration and transmission infrastructure  for Zesa, $5,5 million for rural electrification and $500 000 for solar projects.

 

Paul Nyakazeya

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