Country Report Zimbabwe September 2010

Outlook for 2010-11: Fiscal policy

Fiscal policy will remain a source of conflict both within the MDC and between the MDC and ZANU-PF. The key areas of dispute are likely to be the control of revenue from diamond sales and attempts to cap rising public-sector wages. Tendai Biti is keen to use diamond revenues to finance the budget deficit, but other MDC (and ZANU-PF) ministers are likely to want the funds to be used to boost civil service wages and increase public spending prior to elections. However, it seems likely that the value of the country's diamond stockpile will be towards the lower end of the scale-at US$350m-400m-suggesting that the administration will have to rely on aid grants to finance much of the difference between domestic revenue and expenditure. Meanwhile, government services, particularly healthcare and education, will continue to deteriorate.

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