Gross Domestic Product (GDP) — the value of goods and services produced in a country per year – is expected to increase by about US$6,08 billion. Zimbabwe’s GDP is currently estimated at about US$5 billion.
Government expenditure had been skewed towards recurrent expenditure, leaving the minister with very few options to stimulate growth.
In the five months to May this year, the Zimbabwe Revenue Authority missed revenue targets by $194 million.
Biti’s mid term review indicated that corporate bankruptcy was on the rise and and there was need to press for changes in the country’s labour and bankruptcy laws to safeguard corporate solvency and help create a soft landing for companies on the brink of collapse.
Without these changes, the economy will remain fragile, and indeed government revenues will continue to exhibit sustained weakness.
Analysts said government will need more creativity to broaden the tax revenue base in ensuring that the financing of the budget was sustainable in a manner that would be able to influence the macroeconomic activities more positively.
With the current liquidity crisis Biti needed to allocate more money to sectors with strong primary multiplier effects on employment creation so that the secondary effect on government revenue creation would assist in repaying the country’s loans and put the economy on a sustainable growth path.
The minister however said the country’s inflation target of 5% would be achieved.
Presenting the Mid Term Fiscal policy on Wednesday, Biti said of the US$600 million which was expected from diamond, only US$41,6 million had been recieved during the first half of the year.
“I am very worried about the amount coming from diamond sales which is way below what we anticipated during the first half of the year,” he said.
“What is worrying is that the figures do not correspond with what we getting from those travels,” Biti said.
Biti hinted that the country had failed to drum up international support to finance the budget as donors had adopted a wait-and-see attitude while studying the effects of the friction in the inclusive government, which had also triggered investor fatigue.
Biti said due to the persisting liquidity challenges and depressed operating capacity of major sectors such as mining, agriculture and manufacturing any expenditure effected by any ministry without treasury approval will be regarded as unlawful.
He said there was need to recapitalise the manufacuitng sector which was opersting at 60%.
Biti said projected a grain deficit of US$446 000 metric tonnes, with 200 000 expected to come from strategic reserves.
He said interparastatal debt abouted to US$1,1 billion.
Biti said bank cahrges remained high saying his ministry was crafting “a frame work to ensure that interest rate attract investment, deposits and aid development”.
Biti had projected a US$4 billion 2012 National Budget and a 9,4% economic expansion, underpinned by growth in the mining and agriculture sectors.
But both sectors have failed to perform to expectations while iquidity challenges that have plagued the economy over the last few years remain.