Sunday, December 2

More wonderful economics from Zimbabwe

Zimbabwe has released a "People's Budget". Read and weep, I don't have words to comment on this bizarre step! And then you had thousands of Zimbabweans celebrating the Great Leader's leadership and wanting him to rule again next year. People get the leadership they deserve?


Presenting a so-called "people's budget" to parliament yesterday, Samuel Mumbengegwi, the Zimbabwe finance minister, devalued the Zimbabwe dollar by some 99 per cent, while forecasting a return to positive economic growth in 2008 accompanied by a slowdown in inflation.

With parliamentary and presidential elections scheduled for next March the tag "people's budget" is justified by cuts in personal tax, the zero rating for value added tax purposes of pork products - now the only meat available for low-income consumers - and a long list of government spending pledges designed to "kickstart" the economy.

Political analysts say the budget is mostly irrelevant, since Zimbabweans in urban areas will not believe the numbers, forecasts or promises.

But they agree that, notwithstanding rapidly worsening hyperinflation and country-wide shortages of food, fuel and electricity, President Robert Mugabe is on course to win a comfortable victory next March.

In a muddled presentation, in which the figures in his speech conflicted with those in the official Blue Book, Mr Mumbengegwi said the Zimbabwe economy had performed "remarkably well" despite "illegal economic sanctions imposed upon us by Britain and the west".

He claimed a 4 per cent increase in agricultural production, while acknowledging that output of maize, the country's food staple, fell 36 per cent. Exports, he said, rose 6.4 per cent in US dollar terms, though this still left them at about half their levels of the late 1990s.

In order not to offend Mr Mugabe's sensitivities on the issue, the finance minister camouflaged currency devaluation by referring only to the effective rate at which import duty would be levied.

From Monday customs duties on imports would be levied at an effective exchange rate of Z$270,000 to the US dollar, up from the $30,000 figure announced only three months ago.

Mr Mumbengegwi admitted that it had not been possible to calculate an inflation figure for October with the revealing comment that "many items included in the consumer basket have not been available in the shops".

Economists say it is impossible to take many of the budgetry numbers seriously given the discrepancies in the official figures and the huge inflation-driven variance between original and revised budget figures for 2007. These too are incomplete, with no budget deficit figure, nor an estimate of gross domestic product for 2007.

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