FINANCE minister Tendai Biti’s “eat what you kill” policy faces its biggest challenge in the 2013 budget next week.
Zimbabwe Independent Comment
Overruns on expenditure in his interim budget statements indicate this has become difficult to sustain.
Given the pressure to fund the referendum on the new constitution as well as the general elections, both of which are expected next year, Biti will have to be an adept tightrope walker.
Not only does he have to satisfy the domestic audience, but he also needs to ensure he remains on the good side of the International Monetary Fund (IMF), which this week announced partial relaxation on the conditions it had placed on Zimbabwe, whose debt is US$10,7 billion. The IMF will give Zimbabwe technical, but not financial assistance. This will cover, among other things, public finance management and expenditure policy as well as tax policy and administration, areas which directly affect the budgeting process.
This will be critical for the success of the homegrown Zimbabwe Accelerated Arrears Clearance And Debt Development Strategy.
Biti’s budget must leverage on this and other successes to create opportunities which may eventually see the IMF release financial support, prompting other multilateral and bilateral donors or lenders, who take their cue from the Bretton Woods institution, to come back.
Biti already faces serious problems as shown by his mid-term review this year when he had to revise revenue forecasts downwards from US$4 billion to US$3,6 billion and GDP growth from 9,4% to 5,6%. Without dwelling on the question of where the money will come from, some of the areas that need to be addressed in the budget include financial support to agriculture, the traditional mainstay of the economy critical to food security, mining, infrastructure and social services delivery.
This means, for instance, availing funds for inputs such as fertiliser and stimulating the agricultural sector by enabling the Grain Marketing Board to pay farmers promptly for their crop. A resultant crop output will lead to lower food imports, thereby improving the balance of payments position.
Mobilising funds for power generation is also critical for key sectors of the economy, including mining and manufacturing sectors. Once the economy is powered, so to speak, the promotion of exports and curtailing of imports can then be sustainably pursued.
The country’s current account is bleeding from an unsustainable imports bill which export revenues cannot sustain under the current environment. The current deficit is at least 36% of GDP. This is partly due to a spike in imports.
Biti must also strengthen fiscal management, rebalance the expenditure mix, deal with liquidity challenges, reduce financial sector vulnerabilities and improve the business climate to sustain recovery and growth under threat from the impact of adverse weather conditions on agriculture and political uncertainty ahead of elections, besides global economic shocks.