Budget poser for Biti

balancing widespread expectations against a small resource envelope.
Minister Biti is expected to announce the 2013 Fiscal Policy Statement on November 15.
“Minister Biti has a tough act trying to balance the books. Increasing (civil) wage pressures as well as funding requirements for the referendum and proposed elections in 2013 will mean there is little funding available for key sectors of the economy,” said Mr Anand.
Some economic analysts contend that Minister Biti, once again, faces unbearable pressure from a restless civil service that has for long been demanding salaries in line with the Poverty Datum Line.
Civil servants, especially schoolteachers, threatened countrywide stoppages if their demands were not addressed and look forward to a salary review when the National Budget is announced.
Minister Biti also requires a substantial amount of money to fund the national constitutional referendum, likely to be held before the end of the year.
The Second All-Stakeholders Conference on the new constitution, a precursor to the national referendum, will be held this week.
But Minister Biti’s biggest fund-raising headache revolves around mobilising resources for the harmonised elections, tentatively set for early nex year.
These requirements compete for resources with other national priorities — health and education, safety nets for vulnerable groups and rehabilitation of critical infrastructure such as roads and power.
Against such limitless funding requirements, Minister Biti has to secure resources — domestic or foreign — to support agriculture, manufacturing and mining.
Agriculture requires an estimated US$2 billion annually for inputs and mechanisation. Industry needs US$2 billion for recapitalisation while mining requires US$5-US$7 billion to raise output over the next five years.
These funding requirements are critical for the country to achieve the projected 8,9 percent growth next year, considering funding constraints led to a revision of the 9,4 percent projected economic growth for this year to 4,6 percent.
But it remains a matter of conjecture how Treasury will perform the balancing act in allocating the US$3,8 billion that Government expects to mobilise next year.
This is especially the case considering that poor revenue performance forced Treasury to cut its budget from the original US$4 billion to US$3,6 billion.
Lack of funding to support key economic sectors left the country largely depending on agriculture and mining for growth. But they did not perform to expectations, leading to a revision of the initial growth forecast.
Already, fiscal authorities are struggling to set aside resources for key infrastructure projects such as roads, water and power, as the civil service wage bill, at current salary levels, gobbles 70 percent of the Budget.
“I think the challenge facing Biti is the severe lack of liquidity due to the slowdown in the economy,” said Mr Anand. “The significant decline in economic activity has been primarily due to ongoing political and regulatory uncertainty as well as a disappointing agricultural season.”
While the mining sector has registered positive growth in the wake of serious challenges in raising capital, its performance is “still well below our expectations”.
Government needs to encourage inward investment to spur growth in the sector, which will have positive secondary benefits to other sectors of the economy.
Zambia recently issued a U$750 million bond which was oversubscribed 20 times, reflecting increasing investor confidence in the country.
There is no reason why Zimbabwe cannot raise similar levels of debt on the international financial markets. It begs the question why Zimbabwe remains such a high-risk country for potential investors, especially when foreign investments have done well.
Despite the announcement earlier this year of the accelerated debt restructuring programme, there has been limited progress on this issue and resources will be required to clear debts, if they are not pardoned.
Debt to Gross Domestic Product continues to rise and is currently 118 percent of GDP. This situation is unsustainable and more needs to be done to resolve this issue, especially after the European financial crisis.
Export earnings remain below imports, leading to an increase in the current account deficit. With limited capital inflows, balance of payments support continues to dwindle.
But the balance of payments deficit is expected to fall from US$790 million in 2011 to US$430 million this year.
Once again, much more needs to be done to boost export revenues while curtailing imports, considering that mineral exports account for over 50 percent of export revenues and play a vital role in generating much-needed hard currency earnings for Zimbabwe.
Mineral exports are expected to generate over US$1,8 billion in export revenue, accounting for over 36 percent of the national foreign exchange revenues.
Mixed messages from Government and the ongoing indigenisation programme have been cited as reasons why many investors have stayed away, dealing a blow the economic recovery.