Zimbabwe’s finance minister Tendai Biti says the country's battered economy is on the road to growth of 9.3 percent this year, but he says continued political instability is keeping the nation from potential double-digit growth.
Biti, a top official in the MDC party, reviewed the country’s half-year economic performance in parliament Tuesday and raised questions about export earnings from Zimbabwe’s controversial Marange diamond fields.
He said that agriculture would grow 19.3 percent and mining would grow 44 percent this year to lead the way.
Agricultural exports, which once powered Zimbabwe's economy, collapsed during the last decade after President Robert Mugabe and members of his ZANU-PF party evicted 90 percent of white commercial farmers from their farms in an effort to redistribute land ownership.
Some economic stability began to emerge after a government of national unity was sworn into office in February 2009.
Finance Minister Biti told parliament the projected 9.3 percent economic growth follows growth of 8.1 percent in 2010.
Zimbabwe's global political agreement brought the rival MDC and ZANU-PF parties into the inclusive government. However, many of the GPA's clauses to restore rule of law and reform repressive legislation remain unfulfilled, and Biti says this makes Zimbabwe a risky country for investment.
“The political environment challenges surrounding the inclusive government and slow or non- implementation of certain sections of the GPA have been number one nightmare. Political issues are imposing serious shocks and pressures on our economy,“ he said.
Zimbabwe cannot raise international loans and has a cash economy, so Biti depends on taxes to fund the government.
Biti warned that Zimbabwe could face up to a $700 million budget deficit this year, blaming planned salary increases for government employees.
Biti also told the legislature that Zimbabwe is not making as much money as it should from the Marange diamond fields.
“Diamonds. There are times when resources instead of being a blessing become a curse. The reality of Zimbabwe’s situation is that there is no connection between Zimbabwe’s income from diamonds and its output in international prices,” he said.
International human rights organizations say many people were killed as the military seized control of Marange in 2008 and that there has been massive smuggling of stones. An international regulator now oversees the diamond sales process.
Biti said inflation in Zimbabwe in June was running at 2.9 percent and he predicted the country would achieve a year-end inflation rate of 4.0 percent. That is a gigantic change from 2008, when the inflation rate ran into the billions of percent before the government stopped counting.