ZIMBABWE’S economy could have shrunk by up to 3% during the first four months of the year due to political uncertainty, Finance minister Tendai Biti has said.
REPORT BY BERNARD MPOFU
Biti, who is MDC-T secretary-general, said there was need for clarity on poll dates to build confidence in the economy.
Presenting the state of the economy report for April in Harare yesterday, Biti said although Treasury had secured $25 million to fund the voter registration exercise, indications were that the economy had stagnated due to low business activity.
He said the government was still engaging the United Nations and regional economic powerhouses to source an additional $130 million to fund elections despite conflicting statements within the shaky coalition.
Biti said Treasury had no immediate plans to borrow the funds from the private sector despite receiving a nod from Cabinet.
“The significant and disturbing position that is coming out from our analysis of the economy in the first four months of the year is that there is obvious evidence of shrinkage in the economy,” he said.
“There is clear evidence of economic decline and the elephant in the living room, self evidently remains the issue of elections. I think the sooner there is clarity of the dates, clarity on the processes, clarity on the funding, we should see the return of better business confidence.
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“Businesses are just hanging in there, unsure of what to do given the uncertainty pertaining to the lack of clarity on the exact date of the election . . . I have absolutely no doubt that our quarterly Gross Domestic Product growth rate could have been minus 2% or 3%.”
A survey carried out by Treasury at the just-ended Zimbabwe International Trade Fair, Biti said indicated that manufacturing sector firms had recorded huge declines and near stagnation in production volumes compared to those recorded last year.
This, he said, was triggered by low agricultural output and limited long term financing as well as general un-competitiveness
He said the reduction of broad money supply, which declined to 10,4% in March from 12,91% during the previous month, had also shown signs of a weakening economy. Biti said economic contraction had also been triggered by an unfavourable balance of payment position which has seen imports nearly trebling exports.
Official figures show that out of the $263 million collected in revenue, $199 million went to employment costs leaving the government with limited fiscal space. He attributed last month’s slow down in annual inflation to depressed demand due to liquidity constraints and the depreciation of the rand.
During the month of April, annual inflation slowed down to 2,49% from 2,8% recorded during the previous month.
Turning to food security, Biti said: “We have received the second crop assessment report, which records the unacceptable situation of a major decline in agricultural output…Our strategic grain reserve is less than 40 000 metric tonnes. We are in the process of importing 150 000 metric tonnes of maize from Zambia.”
European External Action Service boss managing director for Africa Nicholas Wescott yesterday, however, said the European Union (EU) will only fund a credible election. Wescot said EU normally funded such activities through UN system and it was unlikely that the UN would fund Zimbabwe’s elections.
“Our criteria for funding elections is that of elections that will be credible. Now, really, we do that with the UN, but the UN will be unlikely to fund because the assessment team was unable to come,” Wescott said.
