Country Report Zimbabwe April 2011

Outlook for 2011-12: Fiscal policy

Fiscal policy will remain a source of conflict both within the MDC and between the MDC and ZANU-PF. Tax revenue is running well short of budget, according to the MDC minister of finance, Tendai Biti, in part because of the "non-receipt" of diamond revenue. Mr Biti is keen to use such revenue to lower the budget deficit, but prior to the elections diamond-funded expenditure will increasingly shift to consumption spending, notably wages, with public-sector pay due to be reviewed in June. While officially running a balanced budget, the government is actually running a deficit of almost 4.5% of GDP, which will need to be funded by loans from non-traditional sources such as China (as well as portions of diamond sales). Concerns about the transparency of official data on the public finances will persist. The extent of off-budget expenditure is difficult to quantify, and the quality of data relating to government spending in particular is in doubt.

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