(NEWZIMBABWE) Biti forecasts 7 percent growth

Biti forecasts 7 percent growth
by Business reporter
25/05/2010 00:00:00

FINANCE Minister Tendai Biti has revised upwards the country’s 2010 economic growth forecast to about 7 percent citing improved foreign investment inflows and increased donor assistance.

Last month Biti announced that the government was likely to revise downwards economic growth prejections from 7.7 percent to 4.8 percent blaming political uncertainty, slower growth and lower than expected donor support.

The minister said, then, that the country had only received about US$2.9 million in donor support this year out of the expected US$810 million.

But speaking at the African Development Bank annual assembly in Ivory Coast on Tuesday, Biti said the initial forecast of 7 percent could be achieved citing foreign investments of up to US$1 billion and an improvement in donor assistance.

"Our growth forecast for this year is 7 percent. We had revised it downwards to 4.8 percent because of lack of capital but I'm very optimistic we will have stronger growth in the second half of the year," Biti said in an interview with reuters adding that diamond sales would also help boost growth.

He however warned that the country faces huge challenges because of its “crippling” public debt of US$6.2 billion.

About US$5.3 billion of the debt comprises external obligations while domestic liabilities amount to US$513 million.
Analysts say the country does not have the capacity of repay its external debt with at least US$3.6 billion of the amount owed being arrears.

The government also remains divided on how to deal with the debt over-hang with sections of the coalition cabinet fiercely opposed to suggestions by Biti that Zimbabwe joins Heavily Indebted Poor Countries Initiative (HIPCI).

Biti also said there was little chance of the country getting its own currency back while the economy was saddled with an estimated $1.9 billion current account deficit.

The virtually worthless Zimbabwe dollar was abandoned in January 2009 in a budget presented by then acting finance minister Patrick Chinamasa.

And the use of foreign currencies such as the US dollar, the South African rand and the Bostwana pula complemented by raft of liberalization measures helped stem the decline of the last decade and put the economy on the path to recovery.

The finance minister also expressed concern over continued assessments of Zimbabwe as a high risk destination.

"What I'm really worried about is the lack of capital, foreign investment of bilateral credit lines," he said.

"The reason is largely because of the perception of high risk. In our macroeconomic foundations, we are doing better than a huge chunk of African countries, but we've got baggage -- a hangover from our years of conflict."