admin2011 National Budget. But hang on! A lot will hinge on policy decisions over the next few months and a spirited attempt to address the challenges mentioned in Tuesday’s Mid-Term Policy Review Statement.
The growth will not just come on a silver platter.
In his presentation, the minister spelt doom and gloom while narrating the challenges burdening the economy such as the imbalance between revenue inflows and expenditure, largely as a result of a ballooning wage bill that is expected to have gobbled up 65 percent of total revenue.
The fact that 30 percent of expenditure is funded locally against a regional average where only 15 percent of the budgets are funded by domestic resources have also put a strain on the economy.
This has been compounded by the lethargy by external creditors to inject significant funds in the economy.
These issues will certainly need to be addressed if much headway is to be made over the next few months.
The first six months of the year, as I mentioned in this column a few weeks ago, have not been that exciting. If anything, the momentum achieved in the last quarter of 2010 slowed down somewhat in the first half of the year requiring a drastic push to get things going.
The feeling in the market is that some people have just resigned to fate if there is anything like that but the picture, as painted by the finance chief, requires real action.
While the good news remains that despite political challenges and other factors that have constricted the economy of late, Zimbabwe is still set to achieve higher economic growth this will certainly demand hard work.
A US$700 million budget deficit will not help matters.
Now, more than ever, it has become evident that Zimbabwe needs to think outside the box and deal with the issues at hand, particularly the issue of liquidity that seems to be worsening at a time more funds are required to oil the economy.
The situation is not entirely bad though as there are pockets of progress that the country can capitalise on.
Minister Biti on Tuesday announced a US$40 million fund for distressed companies. This should help firms that have closed down or those on the verge of closure countrywide that have failed to stave off the current liquidity challenges.
Reports of company closures in Mutare, Marondera, Bulawayo, Gweru, Masvingo and other town have been cause for concern.
Hundreds of jobs have been on the line since the beginning of the year and this facility should be able to go some way to restore viability.
Furthermore, the bulk of the US$70 million Zimbabwe Economic Trade Revival Facility is still available for on-lending to companies.
The prerequisites to this facility will be relaxed to ensure companies benefit from it. Arduous application procedures and other conditions attached to the facility had seen many companies failing to access the funds.
Capacity utilisation has averaged 50 percent as some firms remain constrained.
This is, however, an improvement from 20 percent last year. The US$50 million earmarked for small businesses should also go a long way in boosting activity.
There is so much scope in financing small projects which often have the greatest impact in terms of generating income and jobs. Such countries as India have achieved so much over the last decade through SMEs.
My recent visit to India was a real eye-opener which showed that smaller activities even right from the grassroots levels have helped leverage the Indian economy, turning it into the fourth largest in terms of GDP.
Zimbabwe certainly has the wherewithal to achieve similar feats once we fully apply our minds and resources.
As mentioned by Minister Biti, low Foreign Direct Investment levels have also constrained economic growth, with Zimbabwe accounting for a mere US$105 million out of a possible US$55 billion that came to Africa.
This is an area that needs attention. Zimbabwe has the resources and the skills required by multinational companies. The macro-economic environment has also stabilised but policy inconsistencies and failure to fully articulate other policy issues have put paid to initiatives to attract meaningful investment. This is something that should go some way in resuscitating the economy.
Essar Global, the majority shareholders in Ziscosteel, has also acknowledged that Zimbabwe is endowewed with resources and skills that are attractive to any investor.
It is about time that we capitalise on these to the benefit of our economy. Let the Mid-Year Fiscal Policy guide us and nudge the country into action.
The potential for success is there. What is required is greater resolve to turn this into reality.
In God we trust
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