Zim economy flatlines, state wage bill soars

Reducing the state wage bill was one of the major targets the government had agreed with the IMF.

Capital of Zimbabe, Harare. Picture: Wikimedia Commons.

HARARE - Zimbabwe expects lacklustre economic growth next year, hit by a lack of foreign investment, low commodity prices, a liquidity crunch in the financial sector and weak domestic savings, Finance Minister Patrick Chinamasa said on Thursday.

In his 2015 budget to parliament, Chinamasa said President Robert Mugabe's government was struggling with a high wage bill, seen jumping to 81 percent of the budget from 70 percent.

Growth would tick up slightly to 3.2 percent in 2015 from 3.1 percent this year, while inflation would end 2014 below 1 percent and remain subdued throughout 2015.

The government expected to raise $4.1 billion in revenue, the bulk of which would go to salaries for state workers.

"Our revenues remain static and it is imperative that we walk the talk of re-engagement of private sector players, domestic and foreign and international financial institutions with a view to mobilising additional financing," Chinamasa said.

Donors have withheld financial aid to the Southern African country in protest over Mugabe's controversial policies, including his seizure of white-owned commercial farms and plans to compel foreign companies to cede majority shareholding to local blacks.

Chinamasa said reducing the state wage bill was one of the major targets the government had agreed with the International Monetary Fund under a staff monitoring programme aimed at eventually unlocking support.

Zimbabwe was reviewing its black economic empowerment law and firms would negotiate with relevant government departments on how to comply with the regulations.

He said more than 4,600 companies had shut between 2011-2014, throwing 55,443 workers onto the streets and pushing unemployment above 80 percent.

To boost mining production, Chinamasa said he would defer a 15 percent tax penalty on raw platinum after platinum mining companies provided timelines for constructing refineries.

To boost government plans to add value to minerals and attract investment, Chinamasa removed a 15 percent royalty tax on all diamonds that are cut and polished in the country.

The government had set up a sovereign wealth fund to be funded from 25 percent of royalties on exports of diamonds, gas, granite and other minerals, Chinamasa said.

It had also approved the state-owned infrastructure bank to issue $140 million worth of bonds to develop crumbling infrastructure, improve water services and electricity supply.