Finance Minister Lowers Zimbabwe's 2010 Growth Target in Mid-Term Budget

Zimbabwe’s Finance Minister Tendai Biti cut his forecast for economic growth this year after foreign donors failed to commit as much money as expected, according to the mid-term budget review.

Gross domestic product will expand about 5.4 percent, Biti said in his presentation to parliament in the capital, Harare, today. In the annual budget announced in December 2009, Biti estimated the economy would grow 7 percent in 2010.

The forecast was lowered “due to a number of factors, mainly the fragility of our economy,” Biti said in a phone interview from Harare today.

Zimbabwe’s Movement for Democratic Change formed a power- sharing government with President Robert Mugabe’s Zimbabwe African National Union-Patriotic Front in February last year. With Mugabe still in power, the accord has failed to allay investor concern, with foreign budgetary support falling below the $810 million Biti hoped to garner at the start of this year.

On coming into office, Biti, a member of the MDC, abandoned the Zimbabwe dollar and adopted a “multi-currency” economy that saw inflation plummet from 500 billion percent to deflation. Since then, inflation accelerated to 6.1 percent in May, the Harare-based statistics office said last month.

Inflation is expected to slow to between 4 percent and 5 percent by year-end, Biti said. Inflation data for June should be released by the country’s statistics office tomorrow.

Zimbabwe wants to mine all alluvial diamonds through a state-owned company governed by a diamond act, Biti said.

“This is the consensus of the government and will help us meet the budgetary shortfall caused by the lack of donor support,” he said.

In December, Biti vowed to spend only as much as the southern African nation earned in revenue and from donor support in an effort to cut growing debt.

“Donor countries have been wary of committing to Zimbabwe’s power-sharing government until it is clear that the abuse of the fiscus over the last decade has been brought to an end,” economist John Robertson said in a phone interview from Harare today.

To contact the reporter on this story: Brian Latham in Durban at blatham@bloomberg.net.

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