HARARE (Reuters) - Zimbabwe will present its annual budget this week, which analysts expect to contain desperate measures in the wake of economic collapse amid political crisis.
President Robert Mugabe’s acting Finance Minister Patrick Chinamasa will unveil the 2009 budget in parliament Thursday most likely in U.S. dollars because soaring hyper-inflation has left the Zimbabwean dollar virtually worthless.
Analysts say the budget — coming two months later than usual — would be both a number-crunching exercise and a confirmation that Zimbabwe has been forced to use foreign currencies after the spectacular collapse of its own currency.
The Zimbabwean dollar currently trades at anything up to 40 trillion to the U.S. dollar, despite being re-denominated through the removal of 10 zeroes in August. An average worker earns trillions, but struggles to buy a loaf of bread in the few shops that still accept the local unit.
“The situation is so desperate and I think, outside the usual statements about political enemies, we are going to see some desperate proposals to try to get the economy out of this mess,” said John Robertson, an economic consultant.
Besides “dollarization,” Mugabe’s government is expected to introduce some new taxes in foreign currency — including income and capital gains — to try to boost empty state coffers.
“The simple change of currency is not going to save the economy, but may actually create more problems by getting the whole country, workers across the board, to believe they can get foreign currency without production,” Robertson said.
“What is going to save the economy is an acceptance that we are in this mess because of bad policies and bad politics and that we have to change those to have a foundation for recovery.”
John Makumbe, a veteran political analyst and Mugabe critic, also said the 2009 budget would — as with others in the last 10 years — not be able to pull Zimbabwe out of its deep troubles.
“Mugabe has turned Zimbabwe into a pariah state, and the economy stands condemned and is not going to get any substantial foreign investment or foreign aid until the political crisis is sorted,” he said.
Zimbabwe’s economic data is anyone’s guess at the moment.
The government has not released any official inflation figures since July when annual inflation stood at a staggering 231 million percent — the highest in the world — while state spending figures have also not been disclosed.
In its 2008 budget, Mugabe’s government forecast that the Zimbabwe’s gross domestic product (GDP) would grow by four percent after nearly a decade in decline and that inflation — which stood at 8,000 percent in November 2007 — would average below 2,000 percent in 2008 on increased farming output.
Instead, the economy has plumbed deeper into recession and what had been dubbed “the mother of all farming seasons” turned into another disaster.
Mugabe’s disputed re-election in a violent campaign last year worsened the country’s crisis which, following a collapse in agriculture, includes shortages of food and fuel, power cuts and lately a cholera outbreak that has killed over 3,000 people.
About half Zimbabwe’s 13 million population is surviving on food handouts, and international aid agencies say a lack of funds combined with projections of more food shortages this year could make the crisis worse.
Mugabe, who turns 85 next month and has been in power since independence from Britain in 1980, accuses Western countries of sabotaging Zimbabwe’s economy.
“In Zimbabwe’s position, you are going to need a budget that is going to address this man-made disaster, and I don’t think that’s what we are going to get,” Robertson said.