Moment of truth for Biti

twice.
The Budget should have been announced last Thursday but was moved to Tuesday and further deferred to this afternoon.

There were some unfinished aspects to the fiscal statement, which led to its postponement from Thursday to Tuesday while the absence of President Mugabe, who was away in China, had been overlooked.

Then, as a result of commitments among the principals to the Global Political Agreement, the announcement was further moved to today.
Minister Biti had initially provided for a US$3,4 billion Budget for 2012. But he is likely to make some adjustments after the Kimberley Process allowed Zimbabwe to export diamonds from Marange.

Anjn Diamonds, one of the companies extracting diamonds in Marange, is expected to start exporting its huge stockpile of rough diamonds soon and this should create additional funds for the fiscus.

Since the formation of the inclusive Government, the country has been running on a cash budget with critical issues such as salaries for civil servants, health and education and infrastructure development competing for little budgetary resources. Wages and salaries for State workers are absorbing more than 60 percent of revenue collections.

With the absence of grants from multilateral institutions such as the International Monetary Fund, analysts say Government should consider establishing a Sovereign Wealth Fund to provide budgetary support.

The minister would also walk a tightrope, as he has to make provisions for a Constitutional referendum and elections to be held next year.
Minister Biti would be under pressure to increase revenue streams and probably find a way of financing a possible deficit.

Government is working on new tax reforms and in the Budget the minister is expected to introduce some measures to boost his coffers.

Government made a commitment to deal with the external debt and Minister Biti does not have enough space to manoeuvre on the back of a US$7 billion debt.
Debt has become a serious developmental constraint for the economy and the continued build-up in external arrears, implying that the country is in debt stress and cannot leverage new financial support.