Zimbabwe Cuts Growth Outlook Amid Plans to Lower Wage Bill

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Zimbabwe halved its 2015 economic growth forecast following a drought that hurt farming, and it will scrap a tax on diamond exports as an incentive to boost output, said Finance Minister Patrick Chinamasa.

The projection for growth has been lowered to 1.5 percent from 3.2 percent, said Chinamasa in a half-year fiscal presentation on Thursday in the capital, Harare. The government plans to remove a 15 percent levy on diamond exports in January and reduce the royalty paid by small-scale gold miners to 1 percent from 3 percent, he said.

Mining is the biggest source of foreign exchange for Zimbabwe, which has the world’s largest platinum reserves after South Africa and also has chrome, gold and iron ore. Production of diamonds in the nation fell to 420,000 carats in the first five months of the year from 660,000 carats a year earlier.

Agricultural output in the southern African nation is forecast to shrink 8.2 percent this year because of a drought and the country faces a 700,000 metric-ton deficit of corn, a dietary staple, even after the private sector imported 101,716 tons of the grain, Chinamasa said.

Zimbabwe plans to cut the public wage bill to as low as 40 percent of total spending from about 83 percent as the government considers severance packages following a review of the civil-service workforce, said Chinamasa.

“The government is constrained with the level of resources from the national budget that employment costs continues to absorb at the expense of developmental projects,” Chinamasa said. “The cabinet will be considering the full exit package and necessary proposals in the next few weeks.”

The $14 billion economy has 250,000 civil servants in a population of 15 million.

The Zimbabwe Revenue Authority will probably collect $3.6 billion in taxes this year, down from the $3.9 billion estimate in the national budget released in November, said Chinamasa.

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