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Economy on upswing

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The International Monetary Fund (IMF) has revised upwards the country’s economic growth forecast for 2011 on the back of improved performance by the agriculture sector.

According to a report released this week following the visit by an IMF delegation from June 15-22, the inclusive government should ensure it closes the fiscal financing gap of $445 million while maintaining sufficient expenditure for social programmes and infrastructure.

In his report IMF mission chief for Zimbabwe Vitaliy Kramarenko said the inclusive government should accelerate structural reforms and align the indigenisation and empowerment objectives with respect to private property rights and the need to attract foreign investment.

Kramarenko said following strong growth rates in 2009 -10 the country had a potential to maintain the growth momentum, provided timely corrective policy actions are implemented.

“Under these policy assumptions and a favourable outlook for commodity prices, the economy is projected to grow by 7,5% to 8% in 2011,” reads part of the report.

The IMF had earlier projected the economy to grow by 5,5%.

“The slight upwards revision to growth, compared with projections at the time of Article IV staff report, reflects the faster-than-expected growth in agriculture, particularly tobacco and maize.”

The revision by IMF comes soon after the Africa Development Bank (AfDB) on Wednesday projected that the country would register the fourth fastest growth rate in Africa.

According to the AfDB, African Economic Outlook 2011 report, Zimbabwe will this year record a 7,8% economic growth way ahead of the continental average of 3,7%.

The Ministry of Finance projects the economy to grow by 9,3%. The report said higher commodity prices and increased diamond exports could underpin higher growth, higher Budget revenues and a faster reduction of the current account deficit.
It said the balance of risks to the growth outlook was slanted to the downside.

“Downside risks for the outlook include political disturbances, further wage increases, commodity price declines, higher-than-anticipated increases in imports, food and fuel prices, reversals of capital inflows and the banking system instability,” Kramaraneko said in his report.

The mission said it had identified $113 million of expenditure measures adding that the remaining $332 million could be eliminated by reducing some newly-proposed expenditure items and cutting lower-priority expenditures.

IMF said even if the government manages to eliminate the financing gap, it was likely to experience a temporary cash-flow shortage.

It would be essential to strengthen public financial management to prevent accumulation of new arrears and clear the existing stock of arrears of about $100 million.

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