Text of Zimbabwe's 2007 national budget speech

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.

Zimbabwe reveals budget deficit of 43% of GDP

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.

Zimbabweans Shocked by Price Increases

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.

Zimbabwean minister ruled guilty of contempt of parliament

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

Zimbabwe's bad practice: 3,500 dead each week as meltdown looms

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."

Revised snooping Bill remains undemocratic - MISA-Zimbabwe

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

Doomed From Start

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.

Zimbabwe given a hiding

Business Day

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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