HARARE (Reuters) – Zimbabwe's new government vowed to re-engage with international lenders, curb spending and attract investors to revive its battered economy as it launched its first budget since the fall of Robert Mugabe on Thursday.
Finance Minister Patrick Chinamasa also said that the government would amend the laws of indigenization, limiting local ownership requirement of 51 percent only for the platinum and diamond sectors.
The laws were designed to increase the share of the Zimbabwean economy, but they were opaque and open to abuse, to the detriment of the confidence of foreign investors. The government would also defer an export tax of 15 percent on unprocessed platinum until 2019, said Chinamasa.
"As we focus on the recovery of our economy, we must shed bad behavior and acts of indiscipline that have characterized the past," he told parliament.
To reduce a projected budget deficit by about 10 percent of GDP this year, he said the government would withdraw all officials over 65 and close some diplomatic missions abroad.
Government spending skyrocketed under Mugabe, part of the patronage machinery that kept him in power for 37 years, with more than 90 percent of the budget earmarked for civil service salaries, leaving very little for the investment needed to boost growth.
CHALLENGE OF THE DEFICIT
Chinamasa said the new government aims for a budget for 2018 a deficit of less than 4 percent of GDP, which some analysts said was an ambitious target at a time when the country is expected to hold national elections.
"The main measures (cost savings) are good, but they are not strong enough for the government to generate enough savings to help it meet its budget requirements," Harare economist Gift Mugano told Reuters.
He said that Chinamasa had not met the budget forecasts in recent years and that in its budget discourse there was very little to indicate that 2018 would be different.
Chinamasa also has not clarified what the government will do with the public funds illegally hidden abroad by individuals and companies if they were returned under a three-month window of amnesty announced by Mnangagwa last week.
Mnangagwa, who was sworn in as president on November 24 after the de facto military coup, has vowed to fight the corruption that had become endemic under Mugabe's 37-year rule. Zimbabwe ranks 154 out of 176 countries on Transparency International's Corruption Perception Index.
In the second half of his term, Zimbabwe's economy collapsed, especially after the violent and chaotic seizures of thousands of commercial farms owned by whites.
The issuance of billions of dollars of domestic debt to pay for an inflated civil service also triggered a collapse in the value of Zimbabwe's de facto currency and ignited inflation.
Mnangagwa's most urgent tasks will be to amend relations with donors and the outside world and reach an agreement to settle the arrears of $ 1.8 billion from Zimbabwe to the World Bank and the African Development Bank.
Edition of Andrew Heavens