New Zimbabwe
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Full
text of Zimbabwe's 2007 national budget speech by Finance Minister
Herbert
Murerwa in Parliament on Thursday November 30
2006:
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Last
updated: 12/01/2006 11:52:42
Part One
I. MOTION
1. Mr. Speaker Sir, I
move that leave be granted to bring in a Bill to make
Provisions in
connection with Revenues and Expenditures of the Republic of
Zimbabwe and to
make Provisions for matters ancillary and incidental to this
purpose.
II. INTRODUCTION
2. Firstly, Mr Speaker Sir, I wish
to start my Budget speech by
acknowledging the valuable support and
cooperation that I continue to
receive from Parliament in the formulation
and implementation of the
National Budget.
3. This is consistent with
Government's commitment for improving the
budgeting process by involving a
wider range of stakeholders, including
those at grassroots levels. Such
involvement guarantees the ownership of the
Budget by all stakeholders and
is critical for sustaining consensus over the
implementation of announced
policy measures.
4. It is against this background that my Ministry
undertook a nationwide
consultative outreach programme aimed at involving
the public as much as
possible in the Budget formulation process. My
Ministry benefited
tremendously from the input of stakeholders to which
Government attaches
great value.
5. The central message from these
consultations evolved around the following
challenges among others:
·
Ever-increasing prices;
· Continued distortions in the pricing of key
commodities and utilities;
· Unemployment and rising poverty levels;
·
Foreign exchange shortages;
· Low industrial capacity utilisation;
·
Underutilised allocated land;
· Inadequate measures to deal with rising
levels of corruption in both the
public and private sectors;
·
Deteriorating provision of basic public services;
· Poor maintenance of
infrastructure;
· Inconsistent policy pronouncements;
· Declining clarity
over the role and accountability of the key institutions
of Government;
·
Perceptions of lack of commitment to effectively deal with the challenges
facing the economy; and
· Increasing indiscipline.
6. One of the
consequences of the above challenges, Mr Speaker Sir, is the
emergence of
very large income disparities, with the majority of the lowest
paid workers
earning below the Poverty Datum Line.
7. The deterioration in the welfare
of our people has seen their capacity to
access basic healthcare services,
education, housing and other amenities
collapse overnight, under the
prevailing hyper-inflationary environment.
8. This, Honourable Members,
is happening at a time when a small proportion
of the population is now
accumulating wealth overnight, in part benefiting
from the price distortions
arising from some of the policies and facilities
meant to protect the very
poor.
9. In this environment, the country continues to experience loss of
critical
skills, the dominance of the informal sector in the economy,
declining
capacity utilisation and de-industrialisation. These are some of
the
challenges that the Budget will have to address with
'head-on'.
10. Regrettably some of the wealth accumulation is a direct
product of the
prevailing indiscipline in our economy. We have amongst the
citizens,
individuals benefiting from abuse of public resources and thereby
contributing to unnecessary public expenditures and economic
hardship.
11. Mr Speaker Sir, we therefore need to declare war against
indiscipline,
and in this War, the Budget will not be found wanting. We will
therefore
need to review and strengthen the legislation and penalties for
economic
crimes.
12. Mr Speaker Sir, Honourable Members will be aware
of the partnership with
the private sector in the context of the National
Economic Development
Priority Programme (NEDPP). The thrust of the NEDPP is
the implementation of
Quick Win programmes and projects, whose objective is
to stabilise the
economy and lay the foundation for sustained economic
growth.
13. The 2007 National Budget will play its critical role of
addressing
stakeholder concerns, support the NEDPP measures, foster
macro-economic
stability and restore business confidence.
14. Mr
Speaker Sir, it is no secret that the country remains under siege,
facing
sanctions from the West, characterised by lack of balance of payments
support, lines of credit, foreign direct investment and deliberate efforts
to undermine our economic turnaround initiatives.
15. This makes it
vital that we employ innovative tactics to survive in this
environment,
taking advantage of our abundant natural resource endowment and
reliable
cooperating partners.
16. Mr Speaker Sir, the 2007 Budget will be guided
by the Results Based
Budgeting principles adopted by Government in 2005.
Hence, the expenditure
allocations for the coming year are related to the
anticipated and
time-framed deliverables during 2007. I am happy to note
that submissions
from line Ministries now take the Results Based Budgeting
format on board.
17. The setting of specific deliverable targets for the
respective line
Ministries under the 2007 Budget should also assist to 'turn
the tables' on
the major inflation drivers under Ministries' domains through
active focus
on productivity and close monitoring at the Ministry level. In
this regard,
the Budget will ensure that Ministries focus on their roles and
responsibilities in fighting the overall inflation levels.
18. Mr.
Speaker Sir, Honourable Members will be aware that the
implementation of our
Currency Reform exercise on August 1, 2006 resulted in
the revaluation of
the currency with the removal of three zeros from the old
bearer cheques and
the introduction of a new set of bearer cheques. Hence,
in my presentation,
all domestic currency statistics reflect the revalued
currency.
19.
Mr Speaker Sir, my presentation will cover the fiscal performance up to
October 2006 and the estimates to year end. I will also touch on the
economic challenges we are facing as a Nation.
20. Mr Speaker Sir,
allow me to first of all give a brief overview of the
Global Economic
Outlook, as well as a review of recent Domestic Economic
performance and
projections for 2007.
21. My outline of the Fiscal Outturn during 2006,
will be followed by the
2007 Expenditure Bids by line Ministries, before I
turn to the Thrust and
Priorities for the 2007 National Budget, and my
Revenue Proposals.
III. GLOBAL ECONOMIC OUTLOOK
22. Global
economic performance remained strong in 2006, with emerging
markets
experiencing rapid growth, against the background of strong non-oil
commodity prices, especially minerals. Performance was most notable in China
whose growth is forecast to remain high at about 10% in 2006 and 2007. In
India, growth is expected to remain at 8% percent in 2006, down slightly
from 8.5% in 2005.
23. Thus global growth of 5.1% is forecast in
2006, up from the 4.9%
realised in 2005. Global economic growth is forecast
to slightly drop to
4.9% in 2007.
24. Economic growth in the United
States is expected to increase marginally
to 3.4% in 2006, compared to 3.2%
in 2005. This is being driven by
consumption and residential
investment.
25. Economic recovery in Japan is continuing, with growth
forecast to
increase to 2.7% in 2006, after recording a growth of 2.6% in
2005.
26. In the Euro zone, a 2.4% economic growth is expected in 2006,
up from
1.3% in 2005.
27. The strong recovery in Europe and an
upswing in the Japanese economy
will play a critical role in sustaining
global economic growth.
28. Developing economies continue to grow,
underpinned by fiscal
consolidation, market-oriented reforms, increased
foreign investment inflows
and greater exchange rate flexibility.
29.
In Sub-Saharan Africa, a 5.2% growth is expected in 2006. An upswing in
economic growth to 6.3%, is expected on the back of increased oil output in
Nigeria, Angola and Equatorial Guinea.
30. In Southern and Eastern
Africa, growth of over 5% is expected in 2006.
The region should benefit
from recent efforts to further deepen regional
integration and the opening
up of markets through Free Trade Areas. In this
regard, it is important that
our business community be ready to take
advantage of the opportunities that
arise from deeper regional integration.
31. Strong global economic
growth, especially in China and India, has
continued to support the high
international prices of primary commodities,
especially copper, gold and
platinum. Although oil prices have been coming
down, the price still remains
volatile.
32. In May 2006, gold and platinum prices reached record levels
of US$722
per ounce and US$1328 per ounce, respectively. Brent crude oil
prices
reached a record high of US$79 in August.
33. The threat of
protectionist pressures, coupled with volatile oil prices,
remain major
risks to global growth.
IV. RECENT ECONOMIC
DEVELOPMENTS
Overall Economic Activity
34. Mr. Speaker Sir, the
Zimbabwean economy is expected to register a lower
decline of 2.5% in 2006,
compared to the 3.8% decline registered in 2005.
This is on the back of the
overall economic reversal of the downward trend
experienced in agricultural
production over the past few season.
35. The combination of a good
weather outturn, coupled with the
consolidation of our Land Reform Programme
contributed to the anticipated
6.4% growth in agriculture in
2006.
Graph 1: Percentage Growth of Major Sectors 2001 to 2006 (est)
[Graph Not
Available]
36. The economy is projected to grow marginally
by between 0.5% to 1% in
2007. This is due to the anticipated improved
performance in agriculture and
mining. The performance of the manufacturing
sector continues to be
negatively affected by low capacity utilisation and
is expected to decline
by about 7% in 2006. The sector is projected to
decline at a lower rate of
2% in 2007.
Agriculture
37.
Agriculture is anticipated to grow by about 6.4% in 2006. This, however,
is
lower than the original projection of a growth of 23%. The deviation is
largely on account of lower than anticipated maize and wheat
production.
Graph 2: Agricultral Output Growth 2001 to 2006 [Graph Not
Available]
38. Mr Speaker Sir, the outlook for agriculture for the
2006/07 season is
promising, given Government's efforts to ensure adequate
and timely supply
of critical inputs such as seeds, fertiliser, fuel and
chemicals. These
efforts by Government, in partnership with key private
sector stakeholders,
has seen better coordination and supply of inputs and
will result in
increased productivity and better yields.
39. Early
preparations and the timely provision of inputs create greater
scope for
farmers to adequately plan and hence, the increase in expected
crop
hectarage. The on-going rehabilitation of the greenhouse facilities is
supporting the revival of the horticulture sub-sector.
40. Mr Speaker
Sir, against this background, and also taking account of
forecasts by the
Meteorological Department of a near-normal rainfall season,
agricultural
output is expected to register a growth of 9.4% in
2007.
Mining
41. Mr Speaker Sir, record high international mineral
prices have seen
improved foreign exchange realisations from mineral
exports. Gold prices
have risen to over US$600 per ounce, while copper and
platinum prices have
risen above US$7 000 per ton and US$1 200 per ounce,
respectively.
Similarly, nickel prices have more than doubled to over US$30
000 per ton.
42. However, the lack of extensive mining recapitalisation
at existing mines
and investment in new mining exploration programmes has
remained a major
constraint to the expansion of mining operations. This has
been compounded
by disruptions to power supplies, coupled with rising mining
production
costs which affect viability.
43. The spiralling cost of
capital items, due to inflation, is being
exacerbated by the rising parallel
market exchange rates at which most
imported items are priced.
44.
The other serious challenges still facing the mining sector are the
continued leakages in our mineral exports, especially gold and diamonds.
Owing to the above challenges, gold deliveries declined by 24%, from 10
552.04 kgs in the period January - September 2005, to 7 991.57 kgs in
2006.
45. Asbestos production declined slightly from 93 326 tons by
September 2005
to 82 252 tons for the same period in 2006. However, platinum
production
increased marginally from 3 563.34 kgs in 2005 to 3 822.77 kgs in
2006.
Graph 3: Minerals Growth 2001 to 2006 [Graph Not
Available]
46. The law enforcing agents, together with the Reserve Bank
should
strengthen measures to address leakages in the mining sector.
Policies to
improve viability in the mining sector will be vigorously
pursued by
Government. This should support the revival of mining production,
which is
projected to decline by 14.4% in 2006.
47. In this regard,
realising higher gold production and deliveries will
require an appropriate
exchange rate regime which ensures viability, on the
back of all time high
international mineral prices. Furthermore, the setting
up and taking over of
some gold milling centres by Fidelity Printers and
Refinery should
contribute towards reducing leakages in gold export
receipts.
48. In
coal mining, the recent recapitalisation at the Hwange Colliery
Company has
started to bear fruit. As a result of this recapitalisation, the
mining
company has been able to open the new Chaba Mine and commence
operations at
the 3 Main underground mines.
49. Monthly coal production, is therefore
projected to double by December
2006 to 425 000 tons, enabling the company
to meet local demand of 412 000
tons and to resume exports.
50.
Overall, mining output is estimated to grow by 4.9% in
2007.
Manufacturing
51. Mr Speaker Sir, price distortions, foreign
currency shortages for the
importation of essential raw materials and
spares, energy shortages and
declining real disposable incomes continue to
depress production in the
manufacturing sector. The sector is estimated to
decline by 7% in 2006.
Graph 4: Growth in Manufacturing 2001 to 2006 est
[Graph Not Available]
52. The inability by most manufacturers to source
foreign exchange for
importing raw materials from the inter-bank market has
meant that they have
increasingly relied on the parallel market, where the
exchange rate is
significantly depreciated. This has forced companies to
incur higher
production costs, which are ultimately passed on to consumers
as higher
prices. This has contributed to the escalation of higher
inflation.
53. The shortage of foreign exchange to import adequate raw
has compromised
industrial capacity utilisation. Most companies continue to
operate below
30% capacity which means higher production unit costs. This,
against a
background of rising demand, has contributed to price
escalations.
54. Mr Speaker Sir, measures to ensure growth in the
economy's industrial
base have included support for distressed companies,
Import Substitution and
Value Addition.
55. Schemes already in place
include the $5 billion Fund to resuscitate
distressed companies, which is
being managed by the Infrastructure
Development Bank. The Bank is also
managing the $500 million Value Addition
and Import Substitution
Fund.
56. This, coupled with the initiatives to vigorously promote toll
manufacturing, should also see an improvement in industrial capacity
utilisation. These measures, including an exchange rate regime which
guarantees the viability of exporters, should assist to reverse the decline
in industrial production. The manufacturing sector, Mr Speaker Sir, is
projected to decline by 2% in 2007.
Tourism
57. Vigorous
marketing and promotional initiatives in Asia and the Middle
East markets
are starting to pay dividends as reflected by the increase in
tourist
arrivals from these regions. Growth of the regional and domestic
tourism
markets has also supported growth in the tourism industry.
58. In
response to these marketing efforts, tourist arrivals during the
period to
September 2006, grew by 45% to 1 596 489 over the same period in
2005. The
positive outturn to September 2006 reflects a 52% growth in
tourist arrivals
from African countries, mostly Southern Africa. Tourist
arrivals are
expected to grow by 23% for the year, with growing numbers
coming from
Asia.
Chart 1: Growth in Tourist Arrivals to September 2006. [Chart Not
Available]
59. As the tourism sector recovers there is need to plug all
leakages of
foreign exchange earnings. This should reverse the mismatch
between
increasing tourist arrivals and
revenues.
Transport
60. The economy is benefiting from improved
performance and capacity of the
National Railways of Zimbabwe (NRZ), against
the background of concerted
efforts by the Board, management and client
stakeholders. This has seen
significant refurbishment of locomotives and
wagons, allowing the NRZ to
generate enough revenue to sustain its
operations, including liquidating
statutory obligations for tax, pension,
and medical aid contributions.
61. Sustaining this turnaround, will
require further support in the
rehabilitation of infrastructure, signalling
equipment and the improvement
of locomotive power and rolling stock
capacity. Already, the NRZ is taking
advantage of Government's Look East
Policy in upgrading the Harare-Mutare,
Bulawayo-Victoria Falls and
Bulawayo-Chiredzi lines.
62. Road transport capacity has also benefited
from improved fuel
availability, from the Direct Fuel Import facilities, as
well as the other
facilities being coordinated by the Reserve
Bank.
Inflation Developments
63. Mr Speaker Sir, inflation remains
one of the major challenges facing our
economy. Year on year inflation rose
from 613.2% in January 2006, to reach a
peak of 1 204.6% in August. In
September it however declined to 1 023.3%,
before the rise to 1 070.2% in
October 2006.
Graph 5: Year on Year (YOY) Inflation & Money (M3)
Supply Growth in 2006
[Graph Not Available].
64. Such high levels of
inflation have resulted in the erosion of disposable
incomes and worsened
poverty. Savings have been severely affected, with
pensioners unable to make
ends meet. On the other hand, the competitiveness
of our exports has been
eroded significantly by such high levels of
inflation.
65. Some of
the major drivers of inflation remain:
· The impact of public sector
borrowing requirements, for budgetary
financing;
· Quasi-fiscal
activities funded through the Reserve Bank;
· High money supply growth;
·
Corruption;
· Increase in parallel market activities;
· Foreign exchange
shortages;
· Inflation expectations;
· Price distortions and behaviour of
economic agents; and
· Structural supply bottlenecks.
Graph 6: Average
Year on Year (YOY) Inflation, Money Supply (M3) [Graph Not
Available]
66. Mr Speaker Sir, high levels of inflation have become
increasingly
self-sustaining through the breeding of expectations of even
higher levels
of inflation. In such an environment producers are now
adjusting their
prices on the basis of their expectations of the cost of
replacing stock.
67. Similarly, salary and wage settlements are being
driven by high
inflation and inflationary expectations as workers aim at
avoiding further
erosion of the purchasing power of their
incomes.
68. This behaviour is contributing to the prevailing vicious
wage-price
spiral - where high inflation prompts high wage demands, and vice
versa.
External Sector
69. Mr Speaker Sir, our Balance of Payments
(BOP) position continues to be
under severe pressure, against a background
of declining exports, absence of
BOP support, lines of credit and foreign
direct investment.
70. Reflecting this, a current account deficit of
US$543.3 million is
projected in 2006 as both manufacturing and mining
performance remain
depressed. With agriculture and tourism still to fully
recover, their
contribution to export growth remains limited.
71. In
2006, mineral, manufactured and agricultural exports are projected to
decline by 0.2%, 10.5% and 6.3%, respectively. As a result, exports are
estimated to decline by 6% in 2006.
72. Imports, which increased
marginally by 0.2% in 2005, driven by increased
food, electricity, fuel and
manufactured imports, are however projected to
decline by 1.6% in 2006,
against a background of foreign currency shortages.
73. On the capital
account, net inflows amounting to US$298.4 million are
envisaged. Foreign
direct investment into mining and some of our Parastatals
under the Look
East initiatives are the major factors contributing to the
positive capital
account balance
External Debt
74. Mr Speaker Sir, Zimbabwe remains
committed to honouring all its external
loan obligations. The severe BOP
position, partly arising from sanctions,
however, limits our ability to meet
our external loan obligations.
75. As a result, of the total external
debt outstanding amounting to US$4.1
billion at end of October 2006,
external payment arrears total US$2.2
billion.
V. FISCAL
DEVELOPMENTS IN 2006
76. Mr. Speaker Sir, Honourable Members will recall
that the 2006 Original
Budget, together with the Supplementary Budget I
presented to the House on
July 27, provided for total expenditure and net
lending of $451.1 billion,
revenue of $250 billion, and a deficit of $201.1
billion or 18.7% of
estimated GDP.
77. Actual Budget performance to
October 2006 shows total expenditure and
net lending at $263.2 billion,
against revenue of $229.1 billion. Given
projections for the last two months
of 2006, total revenues will rise to
$351.6 billion.
78. This, Mr.
Speaker Sir, would reduce the budget deficit outturn to $99.5
billion,
implying a much reduced 2006 fiscal deficit of 9.2% of estimated
GDP.
79. Improved revenue collections, largely on account of higher
inflation,
have not been translated into improved service delivery and
project
implementation, given the cost escalations which adversely affected
the
delivery of public services.
Revenue Performance to
October
80. Revenue collection to October remained in line with the
revised revenue
targets and on course at $229.1 billion, against the
background of tighter
enforcement of compliance by ZIMRA. Tax revenue
accounted for $220.9 billion
of this. Non-tax revenue to October 2006,
comprising mainly of fees,
charges, and the 7.5% civil servants pension
deductions, contributed $8.2
billion.
81. The improved collection is
due to increased enforcement of compliance by
ZIMRA. This has resulted in
significant increase in the number of PAYE and
corporate returns being
filed. Value Added Tax and Customs Duty have also
significantly
increased.
82. Value Added Tax collections amounted to $61.5 billion,
translating to
27.5% of total revenue, against a target of $49.2 billion.
VAT on local
sales amounted to $42.3 billion, and that on imports, to $18.3
billion.
Improved VAT collections were attributed to price increases of
goods and
services, as a result of the current hyper inflationary
environment, and
were also complemented by the August 2006, movement in the
official exchange
rate used in valuation of imports. VAT collections are
expected to end the
year at $100 billion.
83. Individual Pay As You
Earn (PAYE) tax collections amounted to $58.1
billion or 26.3% of total
revenue, against a target of $34 billion and are
expected to end the year at
$80 billion. The positive performance of PAYE
reflects the award of higher
than anticipated salary and wage settlements in
both the private and public
sectors.
84. Customs duty collections amounted to $26.7 billion or 12.1%
of total
revenue, against a cumulative target of $23 billion. This improved
performance is partially attributed to the upward movement in the exchange
rate, which impacted on the value of imports. Customs duty collections are
expected to end the year at $40 billion.
85. Corporate profits were
constrained by low capacity utilisation arising
from increased costs of
production and shortages of foreign currency for the
importation of raw
materials and equipment. Cumulative collections for the
period amounted to
$38.3 billion or 17.3% of total revenue, against a target
of $31.9 billion
and are estimated to be around $55 billion by year end.
86. Tax revenue
collections from domestic dividends and interest were $19.9
billion or 9% of
total revenue, and are expected to end the year at $22
billion. Major
contributors to this revenue head were shareholders' tax, at
$12.9 billion,
followed by tax on interest of, $7 billion.
87. Carbon tax contributed
$2.9 billion, while other income taxes
contributed $2.2 billion to overall
tax revenue as at the end of October
2006. The other income taxes were
dominated by Withholding Capital Gains
tax, which raised $1.8 billion, and
other Capital gains taxes which
contributed $366.4 million.
88. The
tobacco levy, however, raised only $50.9 million. This subdued
performance
was against the background of the challenges facing some of the
new tobacco
farmers. These relate to limited expertise, which contributed to
the fall in
yields. However, quality and quantity of product delivered to
the auction
floors should improve in the coming season benefiting from this
year's early
provision of inputs.
89. Excise duty collections performed above
expectations at $7.5 billion to
the end of October 2006 and are projected at
$12 billion by year end.
Alcoholic beverages continue to be the major
contributor to this revenue
head, benefiting from the frequent increases in
the prices of alcoholic
beverages and relatively stable demand.
90.
Excise duty on beer accounted for $4.5 billion, followed by that on
tobacco,
$2.3 billion, & wines and spirits, $812.1 million. The 5% excise
duty on
second hand vehicles generated $370 million, while non-alcoholic
beverages
contributed $483.3 million to excise duties.
91. 'Other taxes' collected
over the ten months to October 2006, contributed
$3.9 billion to total tax
revenue, with stamp duties remaining the major
contributor at $2.1 billion.
Escalations in property values in a hyper
inflationary environment, coupled
with increased activity on the stock
market, are underpinning stamp duty
collections.
92. The banking levy realised $827.3 million, followed by
withholding tax on
tenders, $448.4 million, and the road access fee, $374.8
million. However,
the contribution of presumptive tax to 'other taxes'
remained relatively
small at $112.8 million.
93. Overall revenue
performance in the last two months of 2006, is expected
to remain on course.
The traditional year-end bonus payments, coupled with
corporate tax payments
should augment revenue collections during this
period. Corporate tax
payments under the contemporaneous tax system, wherein
tax is payable in the
fiscal year in which profits are generated, has
greatly increased revenue
under this sub-head.
Expenditure Performance to October
94. Total
Budget expenditures and net lending for the ten-month period to
October 2006
amounted to $263.2 billion, against a target of $321.7 billion.
95. Mr
Speaker Sir, allow me to outline the performance of the key
expenditure
heads.
Employment Costs
96. Employment costs for the period under
review amounted to $85.7 billion,
against a target of $76.3
billion.
97. This expenditure overrun is a result of reviews of public
service
incomes undertaken in January and May 2006, which were meant to
cushion
civil servants in the prevailing hyper inflationary environment.
This also
necessitated further review of housing and transport allowances
with effect
from October 2006.
98. Notwithstanding the above income
adjustments, remuneration levels for
the civil servant remain relatively
low. This is compromising not only the
capacity of Government workers to
afford such basic necessities such as
transport, accommodation, food, and
medical service, but also the ability of
Government to retain and attract
skilled and experienced personnel.
Pension Payments
99. In
addition to reviewing salaries and allowances for civil servants,
Government
further reviewed pension benefits in January and May 2006. The
reviews
resulted in Pension payments of $16.9 billion, against a target of
$15.1
billion. This enabled us to provide some cushion for retirees, as
incomes
were being eroded by inflation.
Goods and Services
100. High
inflation also impacts adversely on the capacity of Ministries to
procure
goods and services. This necessitated the provision of additional
resources
through the Supplementary Budget, mainly on account of increasing
costs on
transport, telecommunication, and utilities.
101. Overall expenditure for
goods and services, at $109.7 billion, exceeded
targeted expenditure by
$118.4 billion.
Capital Expenditures
102. Implementation of
capital projects has also been affected by cost
escalations arising out of
hyper inflation. This has undermined our efforts
to raise the Capital Budget
to the levels targeted by Cabinet of over 30% of
overall Budget
expenditures.
103. Cumulative capital expenditure to October 2006,
amounted to $52.6
billion, against a target of $72.9
billion.
Lending
104. Total net-lending as of October 2006, amounted
to $873.8 million,
against a target of $1.1 billion. Local Authorities
remained the major
beneficiary of Budget on-lending during 2006.
105.
Delays in the submission of programme of works by some targeted
beneficiary
Local Authorities limited the extent of the upgrading of sewer
and water
reticulation facilities in our urban centres.
Quasi-Fiscal
Expenditures
106. Mr Speaker Sir, Honourable Members will be aware that,
in light of the
scarcity of resources within the Budget envelope, some of
the funding
requirements for public and private sector projects were taken
up by our
Central Bank over the last three years. The emergence of some new
priorities
soon after the approval of the 2006 Budget, which could also not
be met
within the Budget envelope, exacerbated the situation.
107.
Honourable Members will also be aware that the quasi-fiscal
expenditures
directly linked to price distortions and Government departments
will
ultimately be serviced by the tax-payer, hence, the need to fully
reflect
such expenditures in the Budget.
108. Such quasi-fiscal expenditures have
risen to levels that are now
undermining our turnaround efforts by
systematically increasing the growth
of money supply and therefore fuelling
inflation, in addition to other
negative effects on the economy.
109.
These negative effects include instances where the quasi-fiscal
expenditures
did not achieve the desired supply response, owing to the abuse
of availed
facilities by some beneficiaries and the lack of deterrent
measures.
110. In this regard, combating inflation will require the
phasing out of all
quasi-fiscal operations and adequately providing
resources for prioritised
expenditures within the Budget. This is also
consistent with accountability
and transparency over the allocation of
public resources. Fulfilment of this
requirement also assists the Nation to
appreciate the totality of public
sector expenditures and
borrowing.
111. Hence, consistent with our Constitution and the Audit and
Exchequer
Act, beginning 2007, all such and any other additional public
expenditures
will be strictly and adequately reflected through the budgetary
process.
112. Mr Speaker Sir, the stock of quasi-fiscal expenditures at
the beginning
of November 2006, amounted to $372.9 billion. Of this amount,
$60.4 billion
are quasi-fiscal expenditures for 2005, while $8.4 billion is
for the fiscal
year 2004. This leaves the quasi-fiscal expenditures for the
current fiscal
year at $304.1 billion as at November 2006.
Import
Payments
113. Of the total quasi-fiscal expenditures, $103.4 billion is
related to
Reserve Bank foreign exchange provision for various import
programmes.
114. In this regard, fuel imports accounted for $49.4
billion. GMB imports
for seed, grain and fertilizer absorbed another $25.5
billion. Payments for
electricity imports, as well as other ZESA imports
totalled $13.3 billion.
Air Zimbabwe foreign exchange requirements accounted
for $8.4 billion.
Agriculture Support Facility
115. In the absence
of strong banking sector financial lending to the
agricultural sector
following the land reform, financial support for
agriculture under the
Agricultural Sector Productivity Enhancement Facility
(ASPEF) amounted to
$101.2 billion.
116. Of the total ASPEF amount, $60.4 billion went to
farmers. Food security
accounted for $18.7 billion, while the winter wheat
programme benefited to
the tune of $21.5 billion, with the balance spread
between tobacco support,
Agribank and the Agricultural and Rural Development
Authority (ARDA).
Maize & Wheat Purchases and Subsidies
117.
Furthermore, in the absence of the review of the Grain Marketing Board
(GMB)
maize and wheat selling prices at a time when the producer prices had
been
adjusted upwards, quasi-fiscal expenditures were also incurred. As at
mid
November 2006, support for maize and wheat purchases amounted to $33.5
billion.
Exchange Losses
118. Distortions in the exchange
rate, which stakeholder consultations
suggest need to be corrected, have
also contributed to us incurring
quasi-fiscal expenditures. In this regard,
total exchange losses were $75.0
billion.
Tobacco, Gold & Cotton
Support
119. The distortions in the exchange rate necessitated support
prices for
some exporters. In this regard, quasi-fiscal support expenditures
benefited
gold producers and tobacco farmers who received subsidy payments
of $8.9
billion and $20.8 billion, respectively. Similarly, cotton farmers
had
received subsides amounting to $0.7 billion by November
2006.
Parastatals & Local Authorities
120. Mr Speaker Sir, a
significant amount of the quasi-fiscal operations
were incurred in support
of the Parastatals and Local Authorities
Re-orientation
Programme.
121. This intervention was against the background of declining
capacity to
deliver basic public services, largely associated with poor
corporate
governance and management structures. Sub-economic tariffs
exacerbated the
situation.
122. Almost all of our Parastatals and
Local Authorities benefited from this
Programme, with draw-downs totalling
$17.8 billion by November 2006.
Productive Sector Facilities
123.
The deteriorating macro-economic environment also had adverse effects
on
manufacturing and mining sector, necessitating the introduction of
concessionary facilities.
124. In this regard, a total of $0.1
billion was extended to resuscitate and
capacitate distressed companies in
manufacturing and, mining sectors.
Troubled Banks
125. Mr Speaker
Sir, Central Bank measures to deal with the issue of problem
banks and
financial institutions have been with us for the last couple of
years. In
the process of restoring the integrity of the banking sector,
insolvent
institutions could not be salvaged.
126. Recapitalising those banks and
institutions requiring liquidity and
additional capital injection saw a
number of troubled banks access the
Troubled Banks Facility. Total support
provided under this window amounted
to $3.2 billion as at mid November
2006.
Loans to Government Departments
127. A number of critical
Government programmes and projects also benefited
from quasi-fiscal
expenditures. In total, over $7.7 billion was extended to
Government
departments for various projects for the Ministry of Local
Government,
Public Works & Urban Development, the Zimbabwe Republic Police,
road
maintenance and upgrading.
Domestic Debt
128. Mr Speaker Sir, the
level of public domestic debt, which had remained
relatively stable during
the first half of the year, has since been
increasing rapidly against the
background of increased expenditure demands
on Government.
129. Total
domestic debt declined from $15.9 billion in December 2005, to
$14.9 billion
by the end of April 2006, against the background of tight
expenditure
management.
130. However, domestic debt increased to $46.1 billion by the
end of June,
largely driven by the review of civil service wages in May. By
September,
domestic debt had risen to $119.4 billion, reflecting the impact
of high
inflation on Government operations and programmes. However by
October 2006,
domestic debt had fallen to $97.8 billion.
131. In the
prevailing hyper inflationary environment, the money market has
largely
operated at the short end. Reflecting this, Treasury Bills of under
one year
maturity continue to account for most of the public domestic debt
at 76.2%,
while 181-day paper accounted for 23.7%. Recourse to the highly
inflationary
overdraft facility with the Reserve Bank has, however, remained
limited.
132. With over 98.5% of domestic debt being short term
Treasury Bills of
less than one year, the restructuring of domestic debt to
long term paper
becomes necessary. Such restructuring will reduce the
interest burden to the
fiscus.
Budget Outturn Including
Quasi-Fiscal Expenditures
133. Mr Speaker Sir, I have already highlighted
the need for us as a Nation
to take a holistic approach in accounting for
budget expenditures. This
entails incorporating into the Budget,
quasi-fiscal outlays incurred on
behalf of Government by the Reserve
Bank.
134. In this regard, I project the 2006 Budget expenditures to
remain within
the $451.1 billion envelope approved by Parliament under both
the original
Budget presentation in December last year and the Supplementary
Budget of
July this year.
135. Quasi-fiscal expenditures are
projected to end 2006 at $372.9 billion.
Incorporating these quasi-fiscal
expenditures in the 2006 Budget outturn
increases overall Budget
expenditures to $824.0 billion.
136. Mr Speaker Sir, such a high level of
expenditure, against the
anticipated revenue outturn of $351.1 billion would
imply a Budget deficit
of $462.9 billion (excluding interest
payments).
137. As a proportion of GDP, this represents an unsustainably
high Budget
deficit of 43.0% of GDP, excluding interest. Such a high Budget
deficit
underpins the very high money supply growth rates of over 1 000% and
the
hyper inflation this Nation continues to experience.
138. Mr
Speaker Sir, dealing with this challenge will require the adoption
of bold
expenditure management measures on our part.
139. Mr Speaker Sir, I now
turn to the Expenditure Bids of Ministries for
the 2007 Budget.
VI.
EXPENDITURE SUBMISSIONS FOR THE 2007 BUDGET
140. Mr Speaker Sir, my
Ministry received from Ministries and Government
Departments, various
expenditure submissions for resource allocations, under
the 2007
Budget.
141. High inflationary expectations appear to underlie most of
the
expenditure submissions from Ministries, given this year's experience.
This
reinforces the challenge before us of reversing the prevailing high
inflationary expectations by adopting and implementing a credible and
sustainable dis-inflation programme. Such a programme should be anchored on
the complementarity between Fiscal and Monetary policies.
142.
Honourable Members, for us to achieve single digit inflation, we will
as a
Nation, have to make sacrifices and endure some pain. We cannot run
away
from this fact, which I would like all of us to appreciate and
acknowledge.
Overall Bids
143. The total 2007 Budget
expenditure bids of line Ministries and
Departments amount to $24.0
trillion. This request excludes interest
payments that will accrue from the
domestic borrowings required to finance
the Budget deficit. These
expenditure bids represent a growth of 5 313% over
this year's anticipated
expenditure outturn. The comparable overall revised
Budget for 2006,
following the Supplementary Budget, is $331.4 billion, also
excludes
interest.
Capital
144. Bids for the Capital Budget in 2007 amount
to $10.9 trillion, up 9 687%
on this year's projected expenditure outturn of
$112.3 billion.
145. Given the above scenario, I have therefore,
rationalised the
expenditure bids by Ministries and Government Departments
in line with our
NEDPP priorities, ongoing Government projects and the
capacity of the Budget
to finance them in a manner that is consistent with
our inflation targets.
146. Mr Speaker Sir, I now turn to the Thrust and
Priorities of the 2007
Budget, which as I have already indicated will be
presented along the
principles of Results Based Budgeting which Government
adopted in 2005.
VII. THE 2007 BUDGET THRUST AND PRIORITIES
147.
Mr Speaker Sir, as we move forward, it will be critical that the 2007
Budget
expenditure levels be consistent with a credible anti inflation
programme,
targeted at drastically reducing money supply growth. This is the
only way
we will begin to have a firm hand in containing inflation, a
prerequisite
for building confidence and dealing with high inflation
expectations.
148. A comprehensive package to re-enforce policy
measures to restore
macro-economic stability will therefore encompass the
following:
· Consistent fiscal consolidation and expenditure
restructuring focusing on
capital development, health and education;
·
Phasing out quasi-fiscal operations and allocating all resources through
the
National Budget;
· Elimination of wholesale subsidisation;
· Dis-inflation
monetary policy and interest rate management framework
targeting reduction
in money supply growth;
· An appropriate exchange rate regime and incentives
to ensure exporter
viability;
· Unlocking Balance of Payments support and
external lines of credit;
· Unlocking foreign exchange resources from the
Diaspora;
· Curbing foreign exchange leakages in the economy;
· Removal of
price distortions and conclusion of a Social Contract binding
Government,
business and labour;
· Enhancing agricultural production to ensure food
security;
· Promotion of mining and tourism development;
· Supporting
import substitution, value addition, toll manufacturing and SME
development;
· Enhancing infrastructure development;
· Strengthening
and streamlining National Social Protection Safety Nets and
Programmes;
and
· Supportive Parastatal and Local Authorities structural
reforms.
149. Central to fiscal and monetary policies complementarity
will be the
targeting of money supply growth to levels consistent with
inflation
targets, guided by a consistent monetary policy targeting
framework, with
quasi-fiscal expenditures curtailed and provided for in the
fiscal budget.
This will require us to ring-fence the existing stock of
quasi-fiscal
expenditures and confine them.
150. Experiences
elsewhere have demonstrated that policy reversals and the
abandonment of
policy initiatives mid-stream, only serve to defer and
magnify the level of
pain endured in the implementation of the necessary
corrective policy
measures.
151. Piecemeal approaches and half-hearted implementation of
critical
policies will not deliver. The need for a credible and consistent
Macro-economic Policy Framework aimed at reducing inflation and realising
macro-economic stability cannot therefore be
over-emphasised.
Macro-Economic Policy Framework
152. The
Macro-Economic Framework for 2007 consistent with the restoration
of
macro-economic stability will include the following:
· Fiscal
consolidation characterised by an increase in the proportion of the
Capital
Budget to 24.4% of expenditures and lowering the Budget Deficit
(excluding
interest) to 17.6% of GDP.
· A dis-inflation programme targeted at
reducing inflation from current four
digit levels to 350-400% by December
2007 and subsequently to under 10% by
December 2008.
· Reflecting all
quasi-fiscal expenditures in the 2006 Budget.
· Phased amortisation of
the quasi fiscal outlays through the fiscal Budget
over three years starting
in 2007.
· Phasing out quasi-fiscal activities and allocating all
Government
expenditures through the Budget.
· The promotion of a more
intimate complementarity between fiscal and
monetary policies.
·
Support of interventions that free up the supply side of the economy from
price distortions which in the past have undermined economic
growth.
· Real GDP growth target of between 0.5% to 1% in 2007.
·
Removal of distortions in the foreign exchange, fuel and other commodities
markets which will be part of the process towards the elimination of
parallel market activities.
· Stabilising incomes and prices under
the auspices of the Incomes and
Pricing Commission, supported by a Social
Contract.
· Strengthening and streamlining Government's Social Safety
Nets Programmes
targeting the vulnerable.
Budget Framework for
2007
153. Mr Speaker Sir, the Budget Framework for 2007 is premised on
the
following assumptions:
· Inflation target of 350-400% by December
2007;
· A real GDP growth of up to 1% and the respective nominal GDP level of
$8.5
trillion;
· Budget Deficit of 17.6% of GDP excluding interest;
·
Budget revenues targeted at 35.3% of GDP, implying revenues of $3.0
trillion;
· 2007 expenditure target of $4.6 trillion excluding
interest;
· Provision of $100 billion for the phased amortisation of
quasi-fiscal
operations;
· Targeting Capital Budget to 24.4% of total
expenditures or $1.5 trillion
and in line with the NEDPP objectives,
prioritise the completion of ongoing
projects.
154. The 2007 Budget
Framework is therefore premised on the economy's
capacity to finance
Government expenditures, and provides an overall
envelope of $6.2 trillion.
This is also consistent with an inflation target
of 350 - 400% by December
2007. Failure to contain expenditures within the
economy's financial
resource capacity would entail higher inflation,
compromising prospects for
economic recovery and growth.
Monetary Targeting Framework
155. In
order to achieve the inflation targets in the Budget Framework, it
is
imperative that greater focus be placed on the containment of monetary
expansion, complemented by consistent and mutually agreed mechanisms of
determining prices and incomes.
156. Pursuant to this, Treasury and
the Central Bank have agreed on a new
Monetary Targeting Framework, under a
dis-inflation programme.
Monetary Policy Anchor
157. Under this
dis-inflation programme, Treasury and the Reserve Bank have
agreed on the
targets for annual money supply growth consistent with the
reduction in
inflation. The Reserve Bank is therefore expected to meet the
following
annual money supply growth and inflation targets:
Table 1: Annual Money
Supply Growth and Inflation Targets
Money Supply Growth Inflation
December
2007 415-500% 350-400%
December 2008 under 65% Under 10%
158. In order
to support the Reserve Bank achieve these monetary anchor
targets,
Government borrowing requirements will be met from resources
outside the
Reserve Bank, and no Government Ministry, Department, Parastatal
or Local
Authority will seek funding directly from the Reserve Bank. Hence,
all such
funding requests to the Reserve Bank, more so when such
expenditures are not
reflected in the National Budget, will be rejected.
159. Similarly,
Treasury will stay within its statutory limits and will only
borrow should
the eventuality arise.
160. To this end, the Reserve Bank will deepen its
liquidity management
interventions, supported by the phasing out of its
quasi-fiscal operations
from January 2007, with those directly related to
price distortions and
Government operations being transferred to the fiscal
Budget.
Quasi-Fiscal Expenditures
161. Quasi-fiscal expenditure
interventions by the Reserve Bank on behalf of
the fiscus will be
regularised through the Budget by absorbing, on a phased
basis, amounts due
from Government. These components of the quasi-fiscal
outlays will be
amortised through the fiscal Budget over the next three
fiscal
Budgets.
162. I therefore propose to allocate $100 billion under the 2007
Budget
towards the repayment of some of our quasi-fiscal outlays that were
effected
by the Reserve Bank in support of Government programmes. This is in
line
with our Monetary Targeting Framework, as well as the realisation of
transparency in accounting for all Government expenditures in
totality.
163. Mr Speaker Sir, let me point out that of the total
quasi-fiscal
outlays, not all of the obligations will be transferred to the
fiscus.
Quasi-fiscal expenditures related to allocations made to farmers,
private
sector companies, Public Enterprises and Local Authorities will be
recovered
from the beneficiaries of these outlays.
164. In this
regard, a Technical Committee comprising Treasury, Ministry of
Economic
Development and the Reserve Bank has been set up to follow up on
these
outlays to ensure that the beneficiaries repay the facilities
availed.
Pricing Practices
165. The realisation of the inflation
and growth targets implied under the
above Macro-economic and Budget
frameworks will not be without pain. The
support of business, labour and
other stakeholders, underpinned by a
mutually Shared National Vision remains
critical for success.
166. In its absence, mistrust among stakeholders
prevails. At the same time,
widespread speculative practices by producers
underpinned by high
inflationary expectations and indexation aligned to
parallel market
activities are perpetuated and drive inflation
higher.
167. Clearly, Mr Speaker Sir, such practices are largely driven
by self
interest, devoid of any commitment to a common Vision.
168.
This often prompts ill-timed and often contradictory policy
pronouncements
and decisions which, not only impact negatively on
confidence, but also
increases uncertainty among economic agents. A notable
example would be
resorting to the re-introduction of unsustainable price
controls which,
however, can only worsen the supply situation.
169. This makes it vital
that we develop consensus over pricing frameworks,
under which the practices
of enterprises are rooted. This should be
supported by ethical and prudent
business behaviour.
Incomes Determination
170. It will also be
necessary that we extend this consensus to influence
expectations that guide
the determination of Incomes, by ensuring that all
stakeholders participate
in sharing the costs and benefits involved in the
quest for the recovery of
our economy.
171. Mr Speaker Sir, I therefore propose the development of
mechanisms
covering the determination of both prices of goods and services
and incomes
of workers. Under this, trigger mechanism arrangements, as well
as frequency
of prices and incomes adjustments, would be mutually agreed
upon under the
auspices of a Prices and Incomes Stabilisation Programme. I
accordingly
propose to set aside an amount of $715.6 million for the set up
and
operational expenses for the programmes.
Productive Sectors
Support
172. Mr Speaker Sir, I have also made reference to the positive
correlation
between improved supply side response and a reduction in
inflation. In this
regard, over and above the factors highlighted in the
foregoing, it is
imperative that the 2007 Budget incorporates measures to
support the
productive sectors of the economy.
173. Cognisant of
this, Government remains committed to supporting improved
capacity
utilisation in the productive sectors of the economy. Targeted
sectors
include agriculture, manufacturing, mining and tourism.
Agricultural
Finance
174. Mr Speaker Sir, Honourable Members will be aware that the
backbone of
financial support to agriculture, following our implementation
of the Land
Reform Programme, has remained with Government, directly through
the Budget,
as well as under the Reserve Bank's Agricultural Sector
Performance
Enhancement Facility.
175. I have already alluded to the
$76.7 billion agricultural support in
2006 under the Reserve Bank's ASPEF
window, which is part of our
quasi-fiscal expenditures through the Reserve
Bank. Direct 2006 Budget
disbursements in support of improving production in
the agricultural sector
totalled $40 billion.
176. This includes $2.4
billion availed for the tobacco crop and $14.2
billion for the 2006/07
summer crop.
177. Government, however, has no capacity to meet the total
financing
requirements of the agricultural sector. Government will continue
to play
its part, and expects greater involvement of the private sector
including
the banking community. Historically, the banking community has
funded the
operations of commercial farmers.
178. Under the auspices
of the National Economic Development Priority
Programme, the private sector
is being encouraged to go into the production
of their requirements of
feedstock for processing such as wheat and soya
bean. I would like to
challenge the private sector to fully participate in
this programme in the
forthcoming season.
179. Mr Speaker Sir, the banking community had raised
concern with security
of tenure as a major factor limiting its capacity to
support farmers. The
issuance of 99 year leases to some of the A2 farmers by
His Excellency the
President on November 9, 2006 should allay these fears,
and introduce an
environment conducive for banking sector involvement in the
financing of
agriculture. Already, 275 of the first 346 applicant A2 farmers
to the Land
Board have become the first beneficiaries of 99 year
leases.
180. Mr Speaker Sir, 99 year leases guarantee beneficiaries
possession of
the farms for the next 99 years. A2 farmers' payment for
improvements made
by previous owners, including those they also make,
enhances the available
collateral for borrowing from banks and other
lenders.
181. Mr Speaker Sir, the 99 year leases can be registered with
the Deeds
Office as in the case of title deeds, thereby enabling banks to
recoup their
money from the lessee or any other person to whom the lease
might be
transferred. The land, however, remains State property and can only
be
transferred with the consent of the State.
182. A1 model farmers
will also soon be assured of security of tenure
through the issuance of
usufruct permits, which give the legal right to use
and derive benefit from
State land.
183. Mr Speaker Sir, these provisions make the lease
agreement the ultimate
security of tenure as provided for by our Laws.
Hence, the 2007 Budget
support to agriculture takes account of banks'
increased participation
through the re-introduction and opening of
facilities and windows closed due
to fears over security of tenure from the
onset of the Land Reform
Programme. The mobilisation of resources through
the banking sector will be
under the guidance of the Reserve
Bank.
Extension & Irrigation Rehabilitation &
Development
184. Mr Speaker Sir, the above arrangements should allow
Government to focus
its interventions at rigorous extension support,
rehabilitation and
development of irrigation infrastructure. I, therefore,
propose to allocate
a total of $46.6 billion in support of mobility and
operational expenses of
AREX, Veterinary and Agricultural Engineering. I
also propose to allocate an
amount of $6.2 billion for agricultural training
through various
Agricultural Colleges falling under the Department of
Agricultural
Education.
185. Mr Speaker Sir, I further propose an
allocation of $33.8 billion
targeted towards irrigation rehabilitation and
development.
186. I am further proposing a Budget provision of $60.2
billion for
Agricultural support with respect to grain, tobacco, and
livestock
production for the 2006/07 season, the 2007 winter wheat crop and
the
requirement of the earlier part of the 2007/08 agricultural season. This
intervention will augment ASPEF resources.
Viability of
Agriculture
187. Mr Speaker Sir, ensuring that the farmer positively
responds to all
this support necessitates our full appreciation of the other
constraints in
agriculture. Some of the constraints evolve around creating
the environment
for the sustainable viability of the producer.
188.
Government will, therefore, timeously monitor and review agricultural
producer prices, balancing this against changes in costs of production and
reasonable rates of return for the farmer.
Farmer
Organisations
189. Furthermore, it is important that we support and
utilise the expertise
of farmer organisations under the Agrarian Land Reform
Programme, especially
in the distribution of inputs and exchange of farming
skills and
experiences.
190. The Ministry of Agriculture is urged to
support and build capacity of
registered farmer organisations. This should
enable farmer organisations to
be more effective and to add value to the
farmer. The disbursement details
will be given in due
course.
Mining
191. Mr Speaker Sir, Government needs to support
the mining industry take
advantage of the firm demand and prices of minerals
on the international
market. Most critical would be the efforts to address
the high costs of
production affecting the viability of the
sector.
192. Recognising the mining sector as a major source of inputs
for our
manufacturing sector and an earner of foreign exchange, it is
necessary that
we begin to increase our interventions in the sector along
the same lines as
in agriculture. Inadequate support has meant that such
facilities as the
Mining Industry Loan Fund remain quite under-capitalised
to the extent that
it fails to make any meaningful impact on the sector. I
therefore propose to
allocate $2.1 billion to the Mining Industry Loan
Fund.
193. It is also critical that the relevant mining authorities
always have
properly coordinated early response mechanisms to deal with
situations of
illegal activities that undermine the realisation of foreign
exchange.
194. Notable examples include the protection of deposits of
diamonds and
other precious minerals currently under siege from illegal
miners in the
Marange area.
195. To curtail leakages of minerals and
to harness foreign currency
earnings from the mining sector, I propose that,
with immediate effect, all
unregistered small scale mining operations be
registered with the Ministry
of Mines and Mining Development and all major
mining zones declared
'protected areas' manned by security
forces.
196. I, therefore, welcome the measures taken to ring-fence and
protect the
Marange diamonds deposit, which include support for improved
technical
expertise in diamond evaluation and putting up security structures
in the
area.
197. The capacity of the Ministry of Mines and Mining
Development is set to
be enhanced given the allocation I hereby propose an
allocation of $4.9
billion, for acquisition of technical equipment and
operational mobility of
the technical departments of the
Ministry.
Tourism
198. Mr Speaker Sir, the tourism sector which is
facing challenges ranging
from negative portrayals of the country, to
erratic fuel supplies, has been
identified under the NEDPP as one of the
sectors with a quick turnaround
potential. In support, Government is
upgrading and improving key
infrastructure facilities such as airports and
dry-land border posts, among
others.
199. Furthermore, Government is
supporting initiatives by the tourism
industry for the rehabilitation of our
tourist facilities, as well as
ensuring sustainable energy supplies. I am
therefore proposing to allocate
$10.4 billion for the completion of various
tourism infrastructure projects
in the Gonarezhou Trans-frontier
Park.
200. Meanwhile, the Zimbabwe Tourism Authority is finalising
details of
establishing a Tourism Development Fund to support all critical
tourism
projects.
Value Addition & Import
Substitution
201. Mr Speaker Sir, Government acknowledges the challenges
that continue to
hamper capacity utilisation in the manufacturing sector,
resulting in the
non-availability of some commodities on the market. Hence,
our interventions
and strategies also need to target the sector along the
same lines as in
agriculture.
202. Mr Speaker Sir, our interventions
have focused firstly on capacitating
companies to increase output. This
should reverse some of the situations
where capacity utilisation in
industries had severely declined, consequently
creating huge import demand
pressures for commodities that could actually be
produced
locally.
203. Secondly, Government is supporting the re-orientation of
our industries'
production patterns through promoting value addition and
processing raw
materials into finished goods in order to increase export
realisations.
204. This is being complemented by support for companies
that, where
applicable, capitalise on excess capacity by entering into toll
manufacturing arrangements. Already, there are nine companies that are
engaging in toll manufacturing at various levels, with another nine ready to
start. These are benefiting from support from the Reserve Bank, as well as
ZIMRA concessions on the operation of bonded warehouses for the imported raw
materials.
205. Facilities already in place, and which require
further support, include
the resuscitation of distressed companies, of which
a concessionary $5
billion Fund is being managed by the Infrastructure
Development Bank.
206. Mr Speaker Sir, of these resources, disbursements
have gone smoothly
with $3.3 billion having been drawn down as of end of
October 2006. Through
this intervention, 23 firms mainly in the
manufacturing and export sectors
were bailed out resulting in 10 000 jobs
being saved. Applications for the
remaining $1.7 billion are at various
stages of consideration.
207. Budget support for distressed companies
can, however, only be a short
term phenomenon. We will, therefore need to
take measures to improve the
business trading environment through addressing
factors causing financial
distress and affecting the viability of industry.
Central is the improvement
in the macro-economic environment characterised
by low inflation and stable
interest rates.
208. Furthermore, the
2006 Budget availed $500 million to the Infrastructure
Development Bank to
establish the Import Substitution and Value Addition
Fund. In this regard,
15 projects in agriculture, manufacturing, mining and
tourism have been
initiated and are at various stages of implementation.
209. I am,
therefore, proposing additional financial support for Import
Substitution
and Value Addition Programmes amounting to $6.8 billion in the
2007
Budget.
210. Such financial support should be complemented by policies
that promote
investment, Value Addition and Import Substitution, as well as
the continued
viability of exporting and the removal of other distortions
undermining
sustainable business activity.
Energy Supply
211.
Mr Speaker Sir, the difficult foreign exchange environment makes it
necessary that we maximise the limited foreign exchange we have through
better coordination of fuel procurement.
212. Currently, there are
too many individual fuel importers. Such a
situation is eroding the benefits
of centralised bulk procurement and
increasing the cost of procurement
through the use of road transportation,
instead of the pipeline. This is
also causing serious damage to the road
network. These high transport costs
are ultimately being passed on to the
consumer.
213. Our efforts to
maximise on fuel procurement should be complemented by
further support for
the development of alternative sources of energy, such
as bio-diesel,
ethanol, solar, wind, etc. Already, a Solar Energy Policy
document is in
place. I will therefore be providing resources to support the
commercialisation of these projects, some of which are being undertaken to
by our technical colleges.
214. With regards to electricity
generation and supply, appropriate pricing
structures still remain to be put
in place. An Inter-Ministerial Committee
has been established to look into
the pricing structure of electricity.
Price Distortions
215. Mr
Speaker Sir, the removal of price distortions in the economy is
critical to
improving the operational environment for the business sector,
guaranteeing
their viability and the sustainability of production and
achieving
macro-economic stability.
216. In such a dynamic macro-economic
environment, Government is closely
monitoring the emergence of price
distortions and undertaking regular
corrective review of prices and
marketing arrangements.
Grain Selling Prices
217. Consistent with
this, Government recently reviewed the producer prices
for maize and wheat
to $52 450.30 and $217 913.40 per tonne, respectively in
order to guarantee
the viability of farmers. This is being followed up by
corresponding review
of the GMB maize and wheat selling prices to millers,
already approved by
Cabinet.
218. Details of the new maize and wheat selling prices to 218.
Details of
the new maize and wheat selling prices to millers will be
announced by the
Minister responsible for Agriculture, following the normal
stakeholder
consultations.
219. The implied subsidies per tonne of
$51 400 for maize and $204 700 for
wheat, at the current GMB selling prices
of $600 and $12 300 respectively,
distort consumption patterns and create
room and opportunities for
speculative and rent-seeking
behaviour.
220. Given the prevailing GMB selling prices of maize and
wheat to millers,
the overall subsidy for this year's maize and wheat crops
would amount to
$26 billion and $53 billion, respectively. These amounts had
to be borne out
of the 2006 Budget and the Reserve Bank. Such levels of
untargeted and
wholesale subsidies undermine the capacity of the Budget to
intervene in
other critical areas.
221. It is only through the
removal of the existing mismatch between the
buying and selling prices of
these commodities that the requirements of this
nature can be shifted away
from the fiscus. I am confident, Mr Speaker Sir,
that this can be avoided in
2007 by the adoption of prices that guarantee
the viability of farmers and
ensuring the ability of the Grain Marketing
Board to finance and maintain
the Strategic Grain Reserve.
222. I propose to set aside $70 billion to
meet the funding gap that may
arise for payments to grain
producers.
Fuel
223. The fuel market remains characterised by
different prices for liquid
petroleum products, notwithstanding recent
efforts to unify petrol and
diesel prices. This has perpetuated rent seeking
behaviour in the pricing of
fuel products, with some of the cheaper NOCZIM
fuel ending up being resold
at a premium on the parallel market by those
able to access it.
224. The removal of the distortions inherent in the
above arrangement
therefore necessitates that bold measures be taken to
unify fuel prices.
This should be supported by ensuring that those able to
utilise free funds
to import fuel are permitted to do so at a reasonable
return. Further,
review of fuel prices should be in line with the already
agreed price
trigger mechanism arrangements.
225. Mr Speaker Sir,
Government has made strides towards the production of
alternative sources of
fuel. I propose to allocate resources amounting to
$10 billion for further
capitalisation and operational expenses of the
development of bio-diesel and
liquid fuel from coal. Thereafter the two
projects will be financed through
private sector investments since they are
commercial by their
nature.
Local Authority & Public Enterprise Tariffs
226. Mr
Speaker Sir, price distortions, alongside mismanagement, poor
corporate
governance and an inadequate legal framework, are also
contributing to the
serious deterioration in Local Authorities and Public
Enterprises' service
delivery.
227. In the absence of Budget capacity to provide for the
revenue
shortfalls, delivery of such basic services as water, energy,
sewerage waste
management, refuse collection and infrastructure maintenance
of roads,
traffic lights and public lighting can no longer be taken for
granted.
228. This has left some Local Authorities and such Parastatals
as ZINWA in
situations where they continuously call on the fiscus and the
Reserve Bank
to support procurement of daily consumables such as chemicals
for water
purification, as well as meeting their salary
obligations.
229. Cognisant of this, measures are being instituted to
address the anomaly
under which the cash recoveries from the delivery of
services by Local
Authorities remain inadequate to cover costs.
230.
This is covering the review of pricing structures for rates, water,
electricity and other tariffs in line with inflation developments, to
augment the economic and efficient operation of Local Authorities and Public
Enterprises.
Foreign Exchange Generation
Ring-fencing Export
Generating Sectors
231. Mr Speaker Sir, the experience over the past few
years has amply
demonstrated the need for a vibrant exporting sector in
supporting the
turnaround programme.
232. Inherent in the prevailing
multiple export support arrangements is
failure to fully and consistently
compensate all earners of foreign exchange
for rising domestic production
costs. In this environment, generating
additional foreign exchange remains
one of the biggest challenges to
economic recovery.
233. Against this
background, Government remains alert to the loss of
exporter viability
caused by the continued rise in the costs of production,
necessitating
urgent need to ring-fence export generating sectors. These
sectors include
manufacturing, mining, tourism, tobacco, horticulture and
cotton.
234. Hence, Mr Speaker Sir, the Reserve Bank will implement
an exchange rate
framework that converges the existing duality in the
foreign exchange
market, through a combination of rapid dis-inflation and
fair compensation
to exporters and other generators of foreign
exchange.
235. The Reserve Bank Governor will unveil the exchange rate
framework, in
his forthcoming Monetary Policy Statement.
Non-resident
Remittances
236. Mr Speaker Sir, the Reserve Bank has already identified
Non-Resident
Remittances as an important potential source of foreign
exchange if properly
managed through schemes supported by fiscal and
monetary incentives.
237. Appropriate supportive measures, targeted at
supporting investment and
other foreign exchange inflows from non-resident
Zimbabweans, are also going
to be unveiled by the Governor in due course.
These will be reviewed
regularly.
Strategic Partnerships
238.
The injection of foreign exchange into the economy will materially
enhance
economic recovery prospects. Such an injection would allow for
foreign
exchange reserves build up and enable the country to begin to deal
with its
external payment arrears, putting the country firmly on the path to
restoring its credit worthiness.
239. Mr Speaker Sir, last year, we
identified strategic partnerships through
the privatisation and
commercialisation of a number of Public Enterprises,
under some of our
Look-East Policy initiatives, as a potential source of
generating
significant foreign exchange. High potential 'quick wins' include
the
National Railways of Zimbabwe, Tel-One and Net-One, Air Zimbabwe, and
the
Zimbabwe Iron and Steel Company.
240. Regrettably, Mr Speaker Sir, we
have so far only been able to make
minimal progress, if any. Moving forward
with this process will require that
we put in place a comprehensive
framework with set targets and identify the
potential enterprises and
timeframes.
241. I will, therefore, be appraising Honourable Members on a
regular basis
on progress on the privatisation and strategic partnerships
for the
Parastatals.
Management of Public Enterprises
242. Mr
Speaker Sir, I have already raised the need for regular review of
tariffs to
economic levels, and embarking on strategic partnerships as part
of the
interventions to effectively deal with the inefficient operations of
most
Parastatals.
243. Over and above this, widespread cases of inefficient
operations,
inconsistent with our other efforts to reduce inflation and
improving
economic performance, will have to be addressed. Central to this
would be
the improved accountability of management and boards of Public
Enterprises.
244. Mr Speaker Sir, respective Ministers have played a part
in the
prevailing operational inefficiencies of some Public Enterprises. On
one
extreme, is routine interference which undermines the accountability of
the
governance structures implied under the various legislation establishing
our
Parastatals. On the other, are situations of abrogation on legislated
responsibilities, paying no attention to the 'goings on' in the Parastatals
we are supposed to supervise.
245. Cases where boards and management
sit back in the midst of serious
operational deficiencies while waiting for
Government intervention bear
testimony to this.
246. Most Parastatals
continue to operate for years without any proper
accounting systems,
notwithstanding that each Minister responsible for a
particular public
enterprise is required to table annual audited accounts of
the particular
parastatal in Parliament at least six months after the end of
each financial
year. Furthermore, key Parastatals are also operating without
boards and
substantive chief executive officers.
247. Mr Speaker Sir, it is high
time that management and boards are made
accountable through performance
agreements and accorded the space to run
these Public Enterprises as viable
commercial entities.
Environmental Sustainability
248. Mr Speaker
Sir, in my nationwide pre-Budget consultations, stakeholders
raised concern
that ineffective monitoring and enforcement of regulations on
the protection
of the environment has become a major threat to environmental
sustainability.
249. Illegal mining activities such as gold and
diamond panning, veld fires,
rampant poaching, water bodies pollution by
industries, improper cultivation
practices, and wanton cutting of trees in
the newly resettled areas were all
cited as causing tremendous damage to our
environment.
250. On timber estates, illegal occupations, often
responsible for numerous
large forest fires and the destruction of
plantations, are also playing
their part in rapid environmental degradation
right under our noses.
Furthermore, uncontrolled logging activities are also
resulting in
deforestation.
251. This is also viewed as contributing
to the changes in the weather
pattern, with the Southern regions of our
country becoming drier as the
rainfall levels decline with each passing
season.
252. In this regard, the Budget is supporting the Environmental
Management
Agency, established as a successor to the Department of Natural
Resources,
mandated by Government to oversee the sustainability of the
environment.
253. I therefore propose to allocate $25.8 billion in order
to enhance the
capacity of the Agency to enforce environmental
protection.
Social Service Delivery
254. Mr Speaker Sir, the
adequate provision of social services, at both
Central and Local Government
levels remains a priority for the Budget.
255. Hence, fiscal
interventions to arrest and reverse some of the declining
provision of basic
services are necessary. Innovative financing strategies
to broaden the
sources of financing beyond Government also need to be
explored.
Health
256. Mr Speaker Sir, the persistent high
inflationary environment, coupled
with the shortage of foreign currency and
manpower, is compromising
provision of quality health service to the people.
Improvement in levels of
funding for medical drugs and supplies as well as
hospital and clinical
equipment remains critical.
257. I therefore
propose to allocate a sum of $590.1 billion towards the
public health
delivery services. The amount proposed includes $345.5 billion
for funding
of central hospitals and $9 billion preventives programmes which
include
Immunisation, TB and Malaria. Employment costs constitute 14.5% of
the
proposed Vote allocation.
258. Development and rehabilitation of health
service infrastructure,
including clinics, mortuaries and equipment accounts
for $39.7 billion.
Access to Education
259. Mr Speaker
Sir, it remains necessary that Government shares the direct
costs of
tertiary education with the beneficiaries. This also improves
accountability
among students in tertiary institutions, as well as ownership
of the
institutions' facilities.
260. Honourable Members would have noted the
many instances where,
surprisingly, even well endowed parents display
inability to pay tertiary
education fees when they were able to get their
children through ordinary
and advanced level education without State
assistance.
261. Government has therefore put in place mechanisms that
embrace means
testing, for support to students under tertiary training
institutions. Means
testing will now draw input from school authorities,
both primary and
secondary to improve on reliability of assessments of
students to be
targeted.
262. Quality primary and secondary school
education, a right of every child,
appears to have been negatively affected
by inadequate funding over the last
few years. Through the Annual Budget and
contribution of partners, including
parents, it will be important that due
attention is given to the
revitalisation of the education
system.
263. In this, the 2007 Budget, I propose to allocate an amount of
$7.6
billion in relation to tuition and learning materials at schools. This
allocation will be disbursed on the basis of improved per capita
rates.
264. Mr Speaker Sir, I also propose to allocate an amount of $4.0
billion
for the maintenance of schools in rural areas, targeting at least
four
schools per District. In addition, I propose to allocate an amount of
$8.2
billion for the construction of schools, the objective being to phase
out
hot sitting in some schools as well as promote access to education by
children in newly resettled areas.
265. To arrest the deterioration
of assets and facilities at public
institutions such as schools in rural
areas, it has become necessary that we
create a facility that enables access
and quick disbursement of resources
for minor repairs and maintenance.
Government already operates a Building
Grants facility to support and
compliment efforts by communities and private
organisations in constructing
schools infrastructure.
266. I am aware that our communities fail to
fully benefit from facilities
of this nature that Government oftens puts in
place due to lack of
information on how they can access such
facilities.
267. Mr Speaker Sir, I propose to allocate an amount of $2
billion for minor
repairs and maintenance through the Rural Capital
Development Fund which is
represented in our Rural Districts. In the case of
schools, Schools
Development Authorities/Committees can access the resources
on the basis of
written applications directly to the respective District
Education Officers
responsible for Buildings. The District Education
Officers will be
responsible for submissions to the Rural Capital
Development Fund.
268. For support regarding construction of education
facilities, I propose
to allocate $3 billion for facilities at both primary
and secondary level.
While administration of Building Grants remain with the
Ministry of
Education, Sport and Culture, modalities for applying and
accessing
resources should change as proposed above.
269. Guided by
the need to enhance supervisory capacity of the Ministry of
Education,
Sports and Culture, I propose to allocate an amount of $6.0
billion to
enable the Ministry procure vehicles for this purpose.
270. Mr Speaker
Sir, for overall education delivery, the proposed allocation
amounts to
$721.9 billion, out of which $48.8 billion stands for
administrative and
teaching and learning expenses as well as capital
transfers towards projects
at State Universities.
Security
271. Mr Speaker Sir, it remains
critical, given global security
developments, that we ensure adequate
funding is availed for the maintenance
of peace, law and order as well as
security. To this end, I propose to
allocate a sum of $255.7 billion for
recurrent expenses, excluding
employment costs, and $60.8 billion, for the
Police, Army, Airforce and
Prison Services.
272. Mr Speaker Sir, the
Nation remains endeared to friendly countries,
which remain in support of
our efforts towards training and re-equipping our
Forces.
Combating
Indiscipline & Corruption
273. Mr Speaker Sir, the stakes on the
fight against indiscipline and
corruption must be stepped up. We, therefore,
have to set aside adequate
resources in support of the institutions of
Government responsible for
fighting corruption and combating the rising
prevalence of indiscipline in
the economy. This is manifested through
economic crime and rampant abuse of
scarce public resources and other ills
that threaten the very fabric of our
society.
274. Over and above
declaring war against indiscipline and corruption, the
successful waging of
this War will require that we also strengthen the laws
and institutions
dealing with economic crimes with a view to introducing
harsher penalties,
including the forfeiture of ill-gotten assets.
275. Pursuant to this, I
propose to allocate funds towards supporting
surveillance units with powers
and skills to expose abuse of such assets as
fuel, motor vehicles,
subsidised grain, inputs, veterinary drugs, among
others.
Public
Service Conditions
276. Mr. Speaker Sir, the availability of the critical
human resource skills
is central to public service delivery and
implementation of public projects.
277. The erosion of real incomes in
the prevailing high inflation
environment has left Government with largely
an unmotivated and poorly paid
public servant.
278. Government
continues to lose skilled manpower, trained at great cost in
all the
critical areas, including health, education and technical fields.
279. Mr
Speaker Sir, it is therefore imperative that the 2007 Budget builds
Government's capacity to retain and attract specialised and strategic
skills, so as to capacitate institutional ability to fully implement
National programmes.
280. In the prevailing hyperinflation
environment, some of the necessary
measures should include timely review of
conditions of service, taking
account of requests by the Public Service
Associations for smaller but more
periodic adjustments, as opposed to larger
infrequent ones.
281. I propose that the review of the remuneration of
civil servants be done
on a quarterly basis in line with the inflationary
developments in the
economy. I therefore propose to set aside an envelope of
$1.4 trillion for
the 2007 Public Services Employment Costs.
282. In
order to ensure the attainment of quarterly adjustments in a manner
that
curtails inflation, Treasury will limit disbursements out of this
envelope
to an average $40 billion per month, across the Public Services,
during the
first quarter of 2007. I therefore urge teams to the Public
Service Joint
Negotiating Council to be guided accordingly.
283. The significant
provision, which represents a 1 205% growth over the
2006 provision, is
motivated by the need to address the brain drain that is
crippling the
operations of Line Ministries hence the deterioration in
service delivery.
While this resource envelope will not fully reverse the
erosion of civil
service incomes, the capacity of the economy to sustain the
current civil
service structure is the determining factor.
Non-monetary
Benefits
284. Mr Speaker Sir, I have also taken note of the requests to
augment
non-monetary benefits of the civil servants, as part of the efforts
to
cushion them from the effects of the erosion of disposable
incomes.
285. In this regard, support for such non-monetary benefits as
access to
housing and transport, will facilitate the provision of decent
accommodation
and affordable transport for lowly remunerated public
servants.
286. I, therefore, propose to allocate $3 billion towards the
expansion of
the Public Service Housing Loan Scheme.
287. I also
propose to allocate $852 million towards the Civil Servants
Vehicle Loan
Scheme.
Skills Retention
288. Mr Speaker Sir, notwithstanding the
above Budget provisions to cushion
civil servants through the review of
conditions of service during 2007,
additional intervention measures are
still necessary to curtail further loss
of skills.
289. Honourable
Members will agree with me and acknowledge that the ultimate
solution
remains stabilising the macro-economic environment and realising
sustainable
growth.
290. In the transition, however, further Budget support for the
Skills
Retention Fund should go someway towards alleviating the brain-drain
in some
of the critical areas of the public sector.
291. Hence, I
propose to allocate $5.5 billion to the recently launched
Skills Retention
Fund for the benefit of targeted critical skills in the
Public Service. This
will allow scope for the provision of premiums to be
paid to expertise in
key posts and professions. The funding requirement for
this initiative is
much higher and, to this end, Government will solicit for
contributions from
friendly cooperating partners.
Pension Reform
292. Mr Speaker Sir,
I have previously alerted the House that we also have a
serious and growing
pension payments.
293. The resources being raised from the contributions
of serving members is
inadequate to cover retirees' pension payments. This
has limited our
capacity to fully index to two thirds of a serving member's
current salary.
A sustainable arrangement would be the introduction of a
Defined
Contribution Pension Fund Scheme.
294. Mr Speaker Sir,
beginning January 1 2007, all the pension deductions
will be set aside for
the establishment of the above Fund as a prelude to
this. We still, however,
need to provide funds to meet due pensions under
Constitutional and
Statutory appropriations.
Housing Delivery
295. Mr Speaker Sir,
housing is a basic necessity which can empower and
enhance the social
security of households, as well as stimulate our
construction and other
related sectors.
296. However, with average small stands costing anything
above $3.5 million,
and a three bed-roomed house in the high density area
costing around $30
million, it is becoming increasingly unaffordable for the
average family to
purchase property.
Financial Times
By Tony
Hawkins in Harare
Published: December 1 2006 02:00 | Last updated:
December 1 2006 02:00
Zimbabwe yesterday revealed a huge budget deficit
for 2006 of Z$824bn
(US$3.3bn). At 43 per cent of gross domestic product the
deficit is more
than double the 18.7 per cent figure estimated in
mid-year.
But despite western economic sanctions and barriers to lending
by
multilateral institutions and foreign donors, finance minister Herbert
Murerwa insisted the economy was beginning to recover. He announced growth
of more than 6 per cent in agricultural output and almost 5 per cent in
mining, but did not give a figure for overall GDP expansion in
2006.
He admitted that inflation - 1,070 per cent in the year to October
- was
excessive, blaming money supply expansion of more than 1,000 per cent.
He
forecast a marked reduction to about 400 per cent by next September.
Poverty
was "worsening" and the export sector had lost competitiveness. As a
result
the country would have a current account balance of payments deficit
in 2006
of US$443m. However, much of this would be funded from capital
inflows in
the form of investment in the mining sector and
parastatals.
In a move that will be welcomed by the International Monetary
Fund mission
scheduled to visit the country next week, Mr Murerwa announced
an end to
"quasi-fiscal" financing, saying that in 2007 all public spending
would be
included in the budget. In 2006 such off-budget spending had
totalled
Z$373bn, and exceeded total government revenue of Z$350bn. This was
the main
reason the budget deficit was larger than forecast.
For
2007, he forecast growth in real GDP of approximately 1 per cent and a
budget deficit of 17.6 per cent of GDP, though this would exclude interest
payments.
He gave no explanation as to how the government would
finance interest
payments on Z$146bn of so-called five year financial sector
stabilisation
bonds issued in the last two months at interest rates as high
as 500 per
cent in 2007. Economists say that this exclusion of debt-service
costs gives
a misleading picture of the budget deficit which will be far
greater than
the minister is willing to admit.
Total public spending
will increase from Z$825bn to Z$4,600bn while revenue
rises more rapidly
(675 per cent).
*The United Nations yesterday appealed to the world's
prosperous nations for
$3.9bn (£2bn) in donations next year to address
humanitarian emergencies
touching 27m people in 29 countries, with most of
the money targeted at
Africa, Reuters reports from the United
Nations.
The single largest sum -$1.2bn - would again go to Sudan, where
multiple
civil wars have left millions homeless and hungry, the UN Office
for the
Co-ordination of Humanitarian Affairs said. The next biggest
components of
the 2007 appeal were the Democratic Republic of Congo,
earmarked for $687m,
and the Palestinian territories, where $454m has been
requested, the office
said. For each success story, where the yearly appeals
have made a
difference, "there is a contrasting story where help could not
be offered
for lack of funds," said Kofi Annan, UN secretary
general.
The $3.9bn amounted to the cost of two cups of coffee for each
citizen of
the world's wealthy nations, he said. "What shall we say when our
children
and grandchildren ask us, 'Why? Why did we let so many women and
children
die unnecessarily when we had the money, we had the knowledge and
we had the
tools to save them?" Mr Annan said.
OhMyNews
Basic commodities now beyond the reach of
many
Nelson G. Katsande (NELKA)
Published
2006-12-01 11:29 (KST)
The troubled Harare City Council has
raised its water tariff charges
by an alarming sixteen-fold. The charges,
set to become effective from next
month, have left the majority of Harare
residents dumbfounded. The increases
come against a background of poor
administration and inadequate financial
controls within the pro-Mugabe
council.
Burst water pipes and uncollected garbage have become a
common sight
in the capital. Some roads leading to high density residential
areas have
become irreparable. Major roads are riddled with potholes. Harare
residents
have expressed concern at the increments which they say do not
match the
quality of service delivery. Mugabe's government has in the past
been blamed
for meddling in the running of the council.
The
council is being run by a commission appointed by the government
and its
tenure of office has long since expired. But the government has
extended its
term of office indefinitely. The government fears that should
independent
elections be held to fill the council seats, the opposition
Movement for
Democratic Change would inevitably win the elections. Harare is
the
opposition's stronghold and poses a great threat to Mugabe's
government.
Zimbabwe is currently experiencing its worst economic
crisis since
1980. As the residents of Harare were bracing up for the new
tariff
increases, the government also announced increases in the price of
milk. But
while the new prices were being announced, retailers and shops
around the
country confirmed that milk was a scarce commodity and blamed the
government
for effecting price changes for scarce products.
A
retailer operating in Harare West told Ohmynews that he had not
received
milk supplies in two months. Most shops in Bindura, 80 km outside
Harare had
since lost hope and deleted the commodity from their inventory
list.
The prices of most basic commodities including health
care are
expected to rise sharply before January 2007. But while the prices
of basic
commodities are now beyond the reach of many, government officials
are
reported to be importing their food supplies from neighboring South
Africa.
Mugabe's wife Grace has in the past been spotted in South
Africa on
expensive shopping sprees. The government's "Education For All"
campaign is
now in tatters as most families are withdrawing their children
from school
due to ever increasing tuition fees. The government has been
blamed by the
people for failing to cushion them against the
increases.
Transport fares too, have risen sharply resulting in the
majority of
workers walking long distances to and from work. Thieves and
muggers now
prey on workers using secluded footpaths at night. As most
industries are
closing down due to viability problems and government
intervention, people
are now engaging in crime to make a living.
People's Daily
Speaker of Zimbabwe's House of Assembly John
Nkomo on Thursday ruled
that Industry and International Trade Minister Obert
Mpofu is guilty of
contempt of Parliament for giving false
evidence.
Mpofu gave conflicting evidence on the management
contract between the
Zimbabwean government and Global Steel Holdings of
India involving the
Zimbabwe Iron and Steel Company when he gave oral
evidence before the
Parliamentary Portfolio Committee on Foreign Affairs,
Industry and
International Trade on Sept. 20 and 27 this year.
Committee chairperson Enock Porusingazi on Nov. 7 this year moved a
motion
recommending that the House of Assembly charge Mpofu, with contempt
of
Parliament for presenting false evidence.
Nkomo had asked for time
to study the case before making a ruling.
The Portfolio Committee
had been investigating the circumstances in
which Global Steel Holdings was
allowed to take over management of ZISCO
Steel without investing
anything.
It called a number of people to appear before it to
present oral
evidence, among them Ministry permanent secretary Christian
Katsande and
Mpofu.
When he first appeared before the Committee
on Sept. 20 this year,
Mpofu said there were people that were making money
out of ZISCO Steel while
the company was bleeding.
Mpofu told
the Committee that the National Economic Conduct
Inspectorate had conducted
investigations into the situation at ZISCO and
compiled a report, which
implicated some top government officials, including
Members of
Parliament.
He said he had persuaded State Enterprises,
Anti-Monopolies and
Anti-Corruption Minister, Paul Mangwana, to withhold
publication and
implementation of the report to ensure negotiations with
potential investors
into ZISCO were not jeopardized, as publication would
have scared away any
investor.
However, when he appeared before
the same Committee a week later,
Mpofu backtracked on his earlier statement,
alleging that he was quoted out
of context.
He denied knowledge
of the NECI report and of any senior government
official or MP that it
implicated, saying it was done long before he was
appointed to the
portfolio.
Source: Xinhua
Independent, UK
By Daniel Howden
Published: 01 December 2006
The gap between HIV
rhetoric and reality in Zimbabwe has become a chasm. And
it is a chasm into
which hundreds of thousands of people are falling.
This was the year we
were told the government would roll out free
antiretroviral drugs to nearly
200,000 of the worst-hit Aids sufferers.
At the first national conference
on HIV/Aids in 2004, President Robert
Mugabe spoke not only of the need for
ARVs but also of the need for
"comprehensive programmes for Aids care that
include access to counselling
and treatment of opportunistic infections,
community-based care and orphan
support."
But, this year, Zimbabwe
has been judged by the World Health Organisation to
have the lowest life
expectancy in the world. Last month, the cemeteries of
the capital, Harare,
were declared full. This week more than 3,500 people
will die of HIV-related
illness and tests on post-natal mothers have found
infection rates of 70 per
cent. A country whose population at its last
census numbered 12 million
people is dying in droves; its health system is
in total disarray and
malnutrition is a daily struggle for the majority of
the country.
The
reality of the government's Aids policy is perhaps better reflected by
Didymus Mutasa, the current Minister of State Security. He has said: "We
would be better off with only six million people, with our own people who
support the liberation struggle; we don't want all these extra
people."
The government's approach to the public health catastrophe is
characterised
by hypocrisy, indifference and denial. Soaring infection rates
have been
compounded by a state-sponsored economic meltdown that has
provoked a famine
in one of Africa's most fertile countries. Much of the
country is forced to
subsist on one meagre meal a day and ARVs, even if they
were supplied,
cannot be taken on an empty stomach.
Hospital
dispensaries in Zimbabwe's second city, Bulawayo, are empty. The
hospitals
themselves are almost empty as unofficial fees have put health
care out of
the range of ordinary people.
A senior doctor who has watched the
disintegration of the health system
said: "They [the government] are still
living in denial or cloud cuckooland
when it comes to Aids. They talk of
waiting lists of six to nine months for
ARVs. The infected don't live that
long."
The gap between HIV rhetoric and reality in Zimbabwe has become a
chasm. And
it is a chasm into which hundreds of thousands of people are
falling.
This was the year we were told the government would roll out
free
antiretroviral drugs to nearly 200,000 of the worst-hit Aids
sufferers.
At the first national conference on HIV/Aids in 2004,
President Robert
Mugabe spoke not only of the need for ARVs but also of the
need for
"comprehensive programmes for Aids care that include access to
counselling
and treatment of opportunistic infections, community-based care
and orphan
support."
But, this year, Zimbabwe has been judged by the
World Health Organisation to
have the lowest life expectancy in the world.
Last month, the cemeteries of
the capital, Harare, were declared full. This
week more than 3,500 people
will die of HIV-related illness and tests on
post-natal mothers have found
infection rates of 70 per cent. A country
whose population at its last
census numbered 12 million people is dying in
droves; its health system is
in total disarray and malnutrition is a daily
struggle for the majority of
the country.
The reality of the
government's Aids policy is perhaps better reflected by
Didymus Mutasa, the
current Minister of State Security. He has said: "We
would be better off
with only six million people, with our own people who
support the liberation
struggle; we don't want all these extra people."
The government's
approach to the public health catastrophe is characterised
by hypocrisy,
indifference and denial. Soaring infection rates have been
compounded by a
state-sponsored economic meltdown that has provoked a famine
in one of
Africa's most fertile countries. Much of the country is forced to
subsist on
one meagre meal a day and ARVs, even if they were supplied,
cannot be taken
on an empty stomach.
Hospital dispensaries in Zimbabwe's second city,
Bulawayo, are empty. The
hospitals themselves are almost empty as unofficial
fees have put health
care out of the range of ordinary people.
A
senior doctor who has watched the disintegration of the health system
said:
"They [the government] are still living in denial or cloud cuckooland
when
it comes to Aids. They talk of waiting lists of six to nine months for
ARVs.
The infected don't live that long."
zimbabwejournalists.com
By a Correspondent
HARARE -
MISA-Zimbabwe has noted with great concern that the revised
Interception of
Communications Bill (ICB) still retains undemocratic
provisions that
threaten the citizens' rights to the fundamental rights of
privacy, freedom
of conscience and association and urges the Parliament of
Zimbabwe not to
pass the proposed law.
The media watchdog said in a statement it
was regrettable that the
government of Zimbabwe appeared determined to have
the Bill passed
regardless of the concerns and input of civic society
organisations, private
citizens and the business community which were
recorded during oral
submissions before the Parliamentary Portfolio
Committee on Transport and
Communications.
An objective
analysis of the Bill undertaken by MISA-Zimbabwe shows
that even in its
revised form, the ICB is retrogressive and repressive and
has no place in a
democratic society.
As was the case with the original Bill, the
revised version is badly
crafted and littered with vague provisions that
render it as a dangerously
bad law.
The Bill fails to disclose the
solid objective behind the proposal for
interception of
communications.
"The proposed law betrays the government's
determination to
criminalise matters that should ordinarily be dealt with by
civil courts or
through alternative dispute resolution," the media watchdog
said. "In
addition, the Bill fails to ensure that legitimate professional
activities
normal in a democracy such as journalism, civic protests, trade
unionism and
political opposition are not subjected to unwarranted
surveillance thereby
posing a serious threat to media freedom and freedom of
expression."
News materials could be intercepted in the course of
transmission
thereby making it impossible or difficult for media houses to
operate freely
and unhindered. If passed in its present form the ICB will
adversely
restrict the nation's access to information and infringe on
freedom of
expression rights.
Even more worrying, said MISA
Zimbabwe, is the serious threat that the
proposed law poses on the viability
of Internet Service Providers (ISPs)
some of whom have already indicated
that they will be left with no option
other than having to close
shop.
ISPs, the banking, legal and other industries and professions
will no
longer be able to assure clients that issues discussed or
information
conveyed in the normal transaction of business will remain
private and
confidential.
Service providers in the
communications industry risk incurring huge
capital expenses through the
acquisition of hardware and software as
compelled under the proposed
law.
While the revised version of the proposed law contains a few
positive
developments such as the reduction of the Ministerial powers by
transferring
certain functions to the Administrative Courts and the
provision of review
functions by the Attorney General or the Administrative
Court, it still
falls far short of accommodating the concerns of citizens
and remains of
great concern.
For instance, the Bill extends
the grace period within which appeals
may be lodged from two weeks to four
weeks but the victim might not even be
aware of the existence of the warrant
of interception thereby depriving one's
right to appeal.
The
three-month duration of the warrants in question is far too long.
Why should
a citizen's privacy be under invasion for such a long time? The
Original
Bill provided that the life of a renewed warrant would be only one
month
long. The revised version extends this to three months.
Further,
the Bill does not provide any limit as to the number of times
for which
warrants may be renewed. Any reasonable and justifiable law
should afford
citizens a substantial degree of certainty. The Bill is also
flawed in that
it does not provide for compensation or damages in the case
of the issuance
of wrongful or malicious warrants. The protection granted
to those
authorised to issue the warrants in question is grossly
unjustifiable.
It is MISA-Zimbabwe firm view that the negative
aspects of the
proposed law as contained in the revised version far outweigh
the positive
ones.
The Bill should therefore be rejected in its
entirety, said
Misa-Zimbabwe. "And any Parliament that respects
constitutionally guaranteed
freedoms and the declarations, charters and
conventions of which Zimbabwe
is signatory to, cannot be expected to pass
this Bill."
For an indepth analysis of the Interception of
Communications Bill,
please visit the MISA-Zimbabwe website: www.misazim.co.zw
Financial Gazette (Harare)
EDITORIAL
November
29, 2006
Posted to the web November 30, 2006
Harare
IT HAS been
reported but not yet denied that Economic Development Minister
Rugare Gumbo
has already admitted the failure of the National Economic
Development
Priority Programme (NEDPP).
As if to give credence to these reports, it
was reported in last week's
issue of this paper that government has gone
back to the drawing board to
draft yet another economic recovery plan to be
unveiled next month. This
should be seen for what it is: a tacit admission
by the government that
NEDPP has failed.
We are hardly surprised. We
knew the initiative was doomed right from the
start. And for good reasons.
Apart from government's dismal record in
implementing economic reforms,
there is also the problem of its widely
condemned Band-Aid approach to
national problems where it has sometimes come
up with initiatives that
seemed to be solutions but had no real effect. That
is why we demurred when
in April this year the government, in a typical case
of wishful thinking,
said the economy would turn the corner towards
recovery, thanks to
NEDPP.
Firstly, we could not see that silver lining in the dark cloud
that only
government could see. At best we could see the beginning of a
sustainable
economic recovery in two to three years. There could never be a
quick
recovery for the Zimbabwean economy. If anything, we said in our
comment of
May 25 2006, we expected further deterioration because we had not
seen the
bottom yet. Suffice to say the economic decline has since then,
accelerated.
Secondly, over the past 15 years Zimbabwe has come up with
no less than
seven economic blueprints. These include the International
Monetary
Fund-sanctioned Economic Structural Adjustment Programme (ESAP),
Vision
2020, Zimbabwe Programme For Economic Stabilisation and
Transformation
(ZIMPREST), the Millennium Economic Recovery Plan (MERP), the
National
Economic Recovery Plan (NERP) and the 10-Point Plan, all of which
met the
same fate -- failure.
Admittedly, some of these blueprints
were well-thought-out and were quite
clear on how the economy could be
revived, indicating that the Zimbabwean
government is strong on paper ideas.
But this is of very little, if any
comfort because no plan is worth the
paper it is written on unless it starts
you doing something! This should
provide a valuable lesson to the government
for which the devil is in
implementation. There is more to it than just
simply coming up with an
economic blueprint and touting it as the panacea to
the country's economic
woes. The goals of such a plan, no matter how well
thought out, can only be
achieved if the government not only fervently
believes in the blueprint but
also vigorously acts upon it.
Yet with ESAP, the government was clearly
reluctant, mostly for political
convenience, to see the austerity measures
to their full expression. Thus
the measures were tucked in piece-meal to the
detriment of the fragile
economy. The stop-go privatisation of state-owned
parastatals whose main aim
was to raise revenue, liberalisation,
deregulation and
efficiency-enhancement and the government's reluctance to
move towards
competitive market forces in the management of the economy as a
whole, are
cases in point.
It was worse for the other economic
revival plans which remained largely
paper reforms. They either never took
that giant leap to implementation or
they were abandoned halfway through
because someone in government who
objects to ideas only when other people
have them, deemed the economic
reforms neither necessary nor
desirable.
And therein lies our argument. If all its predecessor economic
reforms met
the same fate, what made NEDPP, which to all intents and
purposes, was a
panic reaction in the face of the worst economic meltdown in
the history of
the country any different?
There is no denying that
given the deepening economic crisis mirrored
through the runaway inflation,
falling industrial production and employment,
there was an overwhelming need
for Zimbabwe to tread a new path of economic
austerity measures to deal with
these difficulties and forestall what seemed
an imminent economic collapse.
But the fact remains that given the time it
took the government to formulate
a new stimulus package despite a worsening
crisis, just like ESAP before it,
NEDPP was like an unwanted child. Could
the unwanted child turn out to be
perfect, let alone be accepted? Hardly.
And that is why it failed.
Business Day
--------------------------------------------------------------------------------
KHULNA
- Bangladesh, led in fine style by an unbeaten 105 from opening
batsman
Shahriar Nafees, hammered Zimbabwe by nine wickets in the first
limited-
overs international yesterday.
Nafees and Aftab Ahmed (60 not out) put on
114 as the home side easily
reached their target with 186/1 in 45,3
overs.
Sean Williams caught and bowled Mehrab Hossain Jnr (13) to break
the opening
partnership of 72 but Williams missed the opportunity of getting
a second
wicket when wicketkeeper Brendan Taylor dropped Aftab with his
score on just
one.
Nafees was adjudged man-of-the-match after his
third one-day century, which
was scored off 138 balls and included 13
boundaries and one six.
Earlier, Abdur Razzak, with career-best figures
of 4/33, spearheaded the
Bangladeshi spin attack in restricting Zimbabwe to
a modest 184/9.
Zimbabwe started their inn-ings confidently, with a
flurry of boundaries
from openers Taylor (38) and Stuart Matsikenyeri (27),
who put on 52 runs in
their partnership. But the visitors struggled after
their dismissals.
Razzak's fellow spinner Moha-mmad Rafique chipped in
with 2/35 to become the
first Bangladeshi to bag 100 wickets in one-day
internationals. Reuters