Zimbabwe's Finance Minister Patrick Chinamasa on Thursday said the government expects the economy to grow stronger while pledging to lower the proportion of salary payment in the budget to expand spending on infrastructure and social welfare.
Presenting the budget for 2014 at parliament, Chinamasa said the government expects the economy to grow 6.1 percent in 2014, up from the 3.4 percent envisaged in 2013. The stronger growth is projected to be driven mainly by agriculture, mining and construction sectors. Agriculture is expected to grow 9 percent, mining 11.4 percent, while construction 11 percent.
The finance minister said the global economic slowdown, lack of investors' confidence, and liquidity crunch weighed down the performance of the Zimbabwean economy from a robust growth rate of 10.6 percent in 2012.
"It is normal for economies that emerge from hyper-inflation to experience a few years of strong growth as the 'low hanging fruits' are harvested," Chinamasa said.
The finance minister earmarked 4.12 billion US dollars for government spending in 2014, but 73 percent of the amount will be used to cover the salaries and pay for government and state company employees, crowding out the expenditure for infrastructure and social spending.
Chinamasa said the government aims to reduce the wage bill from the prevailing absorption of over 70 percent of the budget to 55-65 percent by 2015, further reducing it to 30 percent by 2018, largely by cutting down on the huge salaries, allowances, and perks being paid to top management of state firms.
The move is believed to respond to the recent exposure of high earnings of a former boss of state-owned broadcaster Zimbabwe Broadcasting Corporation, which exceeded 40,000 US dollars per month. This compared to the average monthly salary of 350 US dollars that most government and state firm employees earn.
Thursday's budget announcement, delayed for one month, also came as Zimbabwe's economy showed signs of stagnation and was prominently squeezed by a liquidity crunch.
Chinamasa was appointed the country's top economic manager after veteran President Robert Mugabe and his Zanu-PF party won elections held in July, ending the tenure of a four-year coalition government formed by Zanu-PF and opposition parties. The post of finance minister, together with top positions of a few other economic ministries, was occupied by the opposition during the coalition government.
Mugabe's Zanu-PF party said it has mapped out an economic blueprint to revive the ailing economy for the next five years. According to the plan, economic growth is expected to reach 9 percent in 2018 when Mugabe finishes the current five-year term.
Chinamasa, a senior Zanu-PF official, said the government would continue without revising the indigenization policy, which requires foreign companies to hand over at least 51 percent of their business to black Zimbabweans, in a bid not to exclude locals from the benefits of economic development.
He proposed to the parliament that the country's multi-currency regime will stay for the foreseeable future, with the government eying to include more currencies into the basket of tradable currencies in Zimbabwe. At present, the US dollar is the main currency used by Zimbabweans, while South African Rand and Botswana Pula are also allowed to circular to compensate the collapse of the Zimbabwean dollar at the height of a decade-old hyper-inflation that ended in 2009.
For 2014, Chinamasa said inflation was expected to remain depressed, but he warned about the downside risk of deflation due to the current liquidity crunch.
Banks and businesses in Zimbabwe are dealing with an acute shortage of money. A surge of cash withdrawal demand before Christmas has put additional strains on local banks. The banks responded by imposing cash withdrawal limits that resulted in long queues of customers at bank branches in downtown Harare.
Chinamasa on Thursday announced a 100-million-US-dollar facility to promote inter-bank lending. He said the inter-bank market is a necessary first step or first resort to build confidence within and amongst the local financial institutions.
On the country's pillar mining sector, Chinamasa said the government would continue a current ban on raw chrome export while planning to ban unrefined gold and platinum export in 2014.
These measures, he said, would increase the value addition and broaden the benefits Zimbabwe gets from its vast mineral resources. Zimbabwe holds the world's second largest reserve of platinum, significant reserves of chrome, gold, and diamond. Measures to improve transparency of diamond production will also put into place to quell speculation on the lucrative diamond trade and alleged missing diamond revenues, Chinamasa said.