HARARE, Zimbabwe (AP)--Zimbabwe's finance minister forecast
deepening hardships and inflation of 700% in a country already facing its worst
economic crisis as he announced the annual budget Thursday.
Painting a bleak picture, Herbert Murerwa said government services like health
and education declined sharply this year; industry was running at below 50%
capacity, and most of the country's infrastructure was crumbling.
Inflation, officially running at 526%, is expected to climb to 700% in the first
quarter of next year, before starting to dissipate, Murerwa said in an address
to Parliament.
The budget deficit, forecast at 7.5%, reached 11% in 2003, fueled by runaway
inflation, he said.
In what he called a budget of "stabilization measures," Murerwa said the
government aims to reign in a record 13.2% decline in the nation's gross
domestic product this year and bring the deficit back on target for 7.5%.
This would be achieved through a range of fiscal measures to increase revenue
and curb overspending by the government, he said.
"The challenges are surmountable," Murerwa said, adding: "It is...imperative we
avoid aborting painful measures" toward recovery."
Previous economic reform packages have frequently been abandoned in midstream.
Zimbabwe is in the throes of political and economic crisis, exacerbated by the
government's often-violent program to seize thousands of white-owned commercial
farms for redistribution to blacks.
The southern African nation faces acute shortages of food, hard currency,
gasoline and other essential imports. Unemployment in the formal economy is
estimated at 70%.
The World Food Program estimates at least 5.5 million Zimbabweans, nearly half
the population, will need emergency food aid in coming months.
Murerwa said the central bank will next month announce new currency exchange and
interest rate policies to help fight inflation.
The official exchange rate is currently 824 Zimbabwe dollars to the U.S dollar,
but the U.S. currency fetches up to 6,000 Zimbabwe dollars on the thriving black
market.
Murerwa also said the government will pay "renewed attention to the generation
of foreign exchange and the elimination of parallel market activities." He
didn't elaborate.
From January 1, income tax will be eased for lower-paid earners, and new 15%
value-added tax on goods and services will be introduced.
Private gasoline importers will be subject to a new levy to the state-run
National Oil Company to ease its debts and enable it to boost fuel imports,
Murerwa said.
Dow Jones Newswires
11-20-031304ET