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Zimbabwe Finance Minister: Budget Will Reduce Inflation to 2,000 Percent

While presenting next year's budget to the public, Zimbabwe's finance minister forecast an 11 percent deficit for 2008 and said he will bring inflation below 2,000 percent. For VOA, Peta Thornycroft reports analysts say Zimbabwe's economy is so seriously collapsed that few of the figures the finance minister presented made much sense.

Economists say the figures Finance Minister Samuel Mumbengegwe presented were the same, in reality, as last year.

The gross domestic product is the same as last year. The difference is that inflation has eroded the buying power so dramatically that in Zimbabwe dollars, the government said it has to spend 170 times more than it did in 2007.

Few people could hear Zimbabwe's annual budget presentation on radio or television because there has been a power cut over most of Harare for the past four days.

Minister Mumbengegwe said the government would bring inflation below 2,000 percent in the next year.

Official inflation is at more than 7,000 percent, but the Central Statistical Office said this week it could not release October's figures, because many items necessary for its calculations were no longer available for sale in the formal market.

The International Monetary Fund predicted earlier this year that Zimbabwe's inflation would reach at least 100,000 percent.

Economists say the government continues to officially ignore differing exchange rates for the Zimbabwe dollar. On the street, it costs 1.6 million Zimbabwe dollars to buy $1 U.S. For electronic transfers, it costs more than double that.

A year ago, $1 U.S. cost only 2,000 Zimbabwe dollars.

Minister Mumbengegwe predicted Zimbabwe would have, what he described as, "the mother of all agricultural seasons," and set aside large amounts for farmers to grow crops for the domestic and export markets. He proposed about one-third of the budget be spent on capital equipment largely to support agriculture.

Dubbing this "The Peoples' Budget", he said there would be "an increase in supply, with emphasis on grassroots economics".

He said nothing about a shortage of bank notes. Economists say on budget day banks are only allowing customers to withdraw the equivalent of one United States dollar from their accounts. Businesses were only allowed to draw $10 U.S.

The finance minister said inflation is due to the "decline in production, sanctions, drought, and speculative activities" among other things.

"The restoration of national confidence" and greater levels of "economic patriotism" were required to force down inflation to a "desirable level" the minister said.