Zimbabwe’s economy slowly gaining track


Zimbabwe’s battered economy is on track to expand for the first time in a decade this year and to grow by 7% in 2010 as agriculture and mining start to recover, the government said.

Finance Minister Tendai Biti delivered the first full budget since a unity government was set up 10 months ago between President Robert Mugabe and his opponents to try to end a crippling economic and political crisis.
"In 2010 we are working on the assumption that the GDP will grow by 7 percent," Biti said.

Biti increased the growth forecast for this year from 3.7 to 4.7%, compared to a 10.9% decline in 2008.
"This is on the back of improved performance in agriculture, mining, manufacturing and tourism," Biti said.

Zimbabwe is battling to rebuild an economy officially estimated to have contracted 50% from 2000-2008.

But the global economic downturn and smouldering tensions in the power-sharing government of President Mugabe and his arch rival Prime Minister Morgan Tsvangirai, have made reconstruction efforts difficult.

Economists said the 2009 forecast may be too optimistic.
"We still expect a slight contraction and next year’s number will be highly dependent on the political developments which at the moment are one of the biggest factors keeping growth from materialising and gaining pace," said Christie Viljoen, economist at NKC Independent Economists.

Political stability crucial

Biti said talks between Mugabe’s ZANU-PF and Tsvangirai’s MDC should be concluded quickly to maintain political stability and re-assure investors Zimbabwe was on course for recovery.
"A lot depends on whether the unity government holds and continues to maintain the political stability needed to continue restoring confidence in the economy," said Nyasha Chasakara, a Harare-based economic analyst.

Biti said government revenues rose from around $4 million in March to $90 million in June, but March to October revenues of $685 million were below the government’s expected $790 million.

He said there had been little revenue from the mining sector hit hard by hyper-inflation and threats of nationalisation last year but this would change as output would rise by 40% next year.

He said $210 million of a $510 million International Monetary Fund allocation, part of the IMF’s global assistance package to countries to help them cope with the worldwide financial crisis, would be spend on infrastructure.

Biti said Zimbabwe had $800 million in pledges from donors, including IMF funds, for next year’s budget. He gave no details.

The IMF allocation is the first major foreign aid Zimbabwe has received in a decade after Mugabe’s ZANU-PF party fell out with Western donors over its policies such as seizing white owned farms to give to landless black Zimbabweans.

Foreign donors continue to withhold aid, insisting the new coalition undertakes far reaching political and economic reform.
"My initial assessment is that the economy is in dire need of external cash injection given the underperformance of revenue collection. There does not appear to be broad plan to acquire the resources needed to finance the budget," said Blessing Sakupwanya, chief economist at a Harare-based commercial bank.