FORMER finance minister, Tendai Biti has said the 2014 budget to be presented on Thursday will be “fictitious” as the government does not have the funds to back it up.
Addressing journalists on Tuesday, Biti condemned government for moving away from the cash budget which the former government of national unity used to a deficit one.
“In the era of cash budgeting, there would be revenues to finance the budget but in this situation where the wage bill alone can’t be financed from the revenue, you are going to have a totally unfunded budget,” he said.
He said the government was likely to bring back the Zimbabwe Dollar abandoned during the hyperinflation era in 2008 opting for the multiple currency system, due to reliance on deficit budgeting.
“The only way to monetise the deficit is to reopen the printing press. That is the only last avenue that this government has,” he said.
Biti said the country’s economy was inching towards stagflation after inflation for November slowed further to 0.54 percent from 0.59 percent in October.
“There is absolutely no economic activity and stagflation becomes a by-product of that absence of economic activity. What you are seeing is a shrinkage of the economy,” he said.
The government, he said, was battling with a huge wage bill constituting around 90 percent of its revenue and was now saddled with a $300 million debt for salaries.
Biti said his MDC-T party was also concerned about the accumulation of domestic arrears forecasting the debt to hit the $1 billion mark by end of the year.
Lack of financial discipline, he said would also negatively impact on the Staff Monitored Programme signed earlier this year with the International Monetary Fund to help monitor the country’s economic reforms and policies, and facilitate arrears clearance with creditors.
He said the government’s over reliance on the banking sector, Diaspora remittances and the private sector to finance the economy was putting a strain on these traditional sources of income.
“The biggest crisis we have in the country is a crisis of production. This crisis then manifests itself as a crisis of liquidity and diminished revenue,” he said.
He said three quarters of the country’s 13 million population was going to face starvation due to poor rains and lack of preparedness for the 2013/14 agricultural season.
Government has set aside $160 million for inputs while banks have only disbursed $200 million to the agric sector which Biti said was inadequate.
He urged the government to normalise relations with the West to attract Foreign Direct Investment, engage the MDC-T over the ‘stolen election’ and to reconsider the indigenisation law which requires foreign firms to cede 51 percent of their shares to local blacks.
President Robert Mugabe and his Zanu PF party claimed an overwhelming victory in the July 31 general election disputed by the opposition MDC.
Critics blame Mugabe’s policies, such as the seizure of white-owned farms to resettle blacks and the current black firm ownership drive, for Zimbabwe’s economic woes.