Makoni presents election budget

Public spending in Zimbabwe will double next year and taxes will be cut in what economists described as an electioneering budget presented to parliament on Thursday. Less than four months before Zimbabwe goes to the polls to elect a president, Simba Makoni, finance minister, shrugged off concerns over deepening recession, a depreciating currency and escalating inflation to announce a 108 percent increase in public spending and the equivalent of US $400 million in tax cuts. Economists described the budget as a holding operation designed to see the country through until the presidential elections in March. "But most voters will soon see that they will probably be no better off," Harare-based analyst John Robertson told IRIN. He added that Makoni had failed to address the real economic causes of the nation's ills. Public spending will increase to 42 percent of gross domestic product from 38 percent this year, while revenues will increase marginally to 27 percent of GDP. The budget deficit will increase to 14.9 percent of GDP from 12 percent. Makoni had been forced to radically revise his earlier growth forecasts for the economy, saying that GDP will fall 7.3 percent in 2001, compared with a budget projection last year of 2.8 percent. Agriculture - hard hit by the land resettlement crisis, drought and a foreign exchange shortage - is leading the downturn with a 12 percent fall in output, while tourism and distribution are down 9 percent and manufacturing and mining 7.5 percent each. "The whole budget is predicated on everything staying the same in Zimbabwe while every indicator shows the economy is rapidly shrinking," Robertson said. He warned that Makoni's package bore little relation to economic reality and would do little to aleviate the nation's crisis. In a speech that was at times remarkably frank, the finance minister admitted 75 percent of Zimbabweans were "living in abject poverty". He revealed health spending per head had fallen from US $23.60 in 1991 to only US $14 today. The top tax rate was cut to 45 percent from 52 percent while the threshold at which income tax becomes payable by low income groups was increased to Zim $90,000 (US $1,125) a year from Zim $60,000 (US $1,687). Robertson said that the increase in the tax threshold would not offer much poverty relief and that Makoni should have upped it to around Zim $110,000 (US $2,062) to have made a real difference to low income Zimbabweans. The budget included US $36 million for compensation to farmers for the 4,800 farms listed for compulsory acquisition. A paltry sum, economists said, given that the average value of each farm listed was about US $1 million.