Zim forced to revise budget
13/04/2006 14:51  - (SA)  

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Harare - Zimbabwe is likely to table a supplementary budget by the middle of the year to help the government meet its spending goals as galloping inflation erodes its purchasing power, officials and analysts said on Thursday.

Zimbabwe's annual inflation rate, the highest in the world, touched a record 913% in March - the result of a deep eight-year recession widely blamed on President Robert Mugabe's government.

Finance Minister Herbert Murerwa based his 2006 budget on inflation easing to 80% by December this year, but analysts say it is likely to have hit four digits by then in a trend which is also being acknowledged by the government.

Subject to approval

"A supplementary budget will be presented in June or July this year but this is subject to approval from key economic stakeholders," the state Herald newspaper quoted an unnamed official as saying on Thursday.

"Many government departments are failing to pay for services rendered because funds allocated to them have been eroded by inflation," he said.

Government officials were not immediately available for comment.

The central bank had forecast inflation - branded the country's number one enemy by Mugabe - peaking between 700-800% by the end of the first quarter before subsiding to a 280-300 range by June.

"Given the strong inflationary pressures that the economy is facing, a supplementary budget is now inevitable," David Mupamhadzi, an economist at Zimbabwe Allied Banking Group, said.

"In a hyperinflationary environment, budgets are bound to be revised ... In the government's case where the budget was calculated with a year-end inflation target of 80 percent a supplementary budget is inevitable," he added.

Deficit seen growing

Inflation has played havoc with the life of ordinary Zimbabweans, whose eroded income has forced many to carry huge wads of notes to buy the most basic commodities.

Analysts say the rising prices of basic foodstuffs, public transport and housing is stoking anger in an urban population already struggling with breaking sewerage systems, water and electricity cuts, uncollected garbage and deteriorating roads.

A supplementary budget would result in an upward revision to Zimbabwe's official deficit for the year, initially projected at 4.6% of gross domestic product, with the government borrowing more on the domestic market to plug gaps, they said.

The government's domestic debt stood at Z$15 trillion at the end of last month. Analysts say its upward march, along with the sliding Zimbabwe currency, is driving broad money supply growth and inflation.

"The concern obviously of a supplementary budget is the impact on the budget deficit, which will grow for the current fiscal year and will continue to feed into the inflationary cycle," said James Jowa, a Harare-based economist.

International donors have halted lending to Harare over policy differences such as Mugabe's seizures of white-owned farms for blacks, forcing the government to borrow locally.

Mugabe denies charges from critics that he mismanaged the economy and instead charges that his opponents have ganged up against him to punish his government for the land seizures.

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