Zimbabwe"s Finance Minister Tendai Biti
Zimbabwe"s Finance Minister Tendai Biti presents his mid-term budget speech in Harare, July 26, 2011. REUTERS

Zimbabwe's economy will grow at a slower pace in 2012 than this year as politics puts a drag on full recovery and inflation should stay in single figures, partly due to prudent fiscal policy, Finance Minister Tendai Biti said on Wednesday.

The economy grew in 2009 after a decade of contraction amid political turmoil, lifted by President Robert Mugabe's formation of a power-sharing government with long-time rival and now prime minister, Morgan Tsvangirai.

Zimbabwe's economy is likely to grow 7.8 to 9 pct in 2012 compared with 9.3 pct in 2011, Finance Minister Tendai Biti said in a pre-budget statement on Wednesday.

Biti said agriculture and mining would remain the major drivers of growth while tourism, manufacturing, transport and communication would also contribute to the growth.

You may ask why we are discounting the GDP (projecting slower growth). We are making the assumption that there will be corrosive politics in 2012, election talk, which will affect the economy, Biti told a sitting of Parliament.

Biti added that Zimbabwe's growth was vulnerable to a dip in commodity prices, as high gold and platinum prices contributed significantly to the country's revenues.

The southern African country has also recovered from hyper-inflation which hit 500 billion percent in 2008 but has fallen back into single figures thanks to the adoption of multi-currencies in 2009.

Annual inflation was seen averaging between 3.7 and 5 percent up to the end of 2012.

Revenue was expected to rise to $3.4 billion in 2012 -- the same figure as expenditure -- from $2.7 billion in 2011, but inflows from foreign donors were seen dipping to $500 million from $593.7 million this year.

Donors have continued to channel funding through non-governmental organisations -- rather than directly to government -- and United Nations agencies due to sharp policy differences with Mugabe's previous government, such as the seizure of white-owned commercial farms in 2000.


Export earnings should increase slightly to $4.6 billion next year from $4.1 billion in 2012, Biti said. Imports would remain higher, however, at $5.7 billion.

Biti said the government would need to find money to fund a referendum on a new constitution and a general election that would bring an end to the uneasy coalition government.

Last week Biti said government spending was a big concern and on Wednesday reiterated that Zimbabwe would spend $2 billion on salaries for its 250,000 state workers next year, which he said was a disaster.

The high salary bill leaves little for the government to provide clean water, electricity, health and education.

Biti also called on government to sell off loss-making state enterprises. He suggested selling state-owned airline Air Zimbabwe, mobile phone operator Net One, the national rail company and the state grain procurer.

The government has previously said it needs $10 billion to rebuild the economy but donors are demanding more political reforms from Mugabe, who has clashed with the West, mainly over charges of human rights abuses against his opponents.

No one wants to help us because of political noise. We are not being judged on our management of the economy, we are being judged for our politics. Politics is putting a premium on this economy, Biti said.