Zimbabwe economic crisis to worsen

Zimbabweans blame President Mugabe for economic decline

Zimbabwe's finance minister has presented the country's annual budget, painting a picture of serious economic decline and national debt.

Finance Minister Simba Makoni said the country was in crisis and that the economy was expected to shrink by over 4%.

Many families, he said, could only afford one meal a day, and many of those who still had jobs had to walk to work because of rising transport costs.

Budget highlights

Economy to shrink by 4.2%

Agriculture to decline by 10%

Budget deficit hits 25% of GDP

Defence budget cut by Z$2bn

Land reform controversy, lack of rule of law and DR Congo conflict ruining the economy

Mr Makoni said uncertainty over land reform, the perceived absence of the rule of law and the cost of Zimbabwe's involvement in the DR Congo war had undermined the economy.

The minister said he expected agriculture - the biggest sector in the economy - to decline by nearly 10% in the coming year.

The opposition described the minister's analysis of the country's economic problems as courageous but said his budget could not secure the international support needed to avoid further decline.

Defence budget

Mr Makoni said the government must learn to live within its means and suggested privatisation of loss-making state run companies as a way of tackling both external and domestic debts.

Makoni hopes to resuscitate Zimbabwe economy

"The high budget deficit we have contracted has compelled government to borrow excessively, placing the country in serious debt," he said.

He announced that defence spending would be cut from Z$15.3bn ($280m) to Z$13.3bn next year in anticipation of a peace settlement in the DR Congo.

International donors have suspended aid programmes to Zimbabwe over its spending in the DR Congo where President Mugabe has sent nearly 10,000 troops in support of the Kinshasa regime against a rebellion.

Some estimates put the cost of Zimbabwe's involvement at up to $150m per month.

Mr Makoni has already told parliament the country's continued involvement was untenable, but there are few signs of a government commitment to withdrawal.

Economic squeeze

Mr Makoni, a former respected businessman, was appointed in June after the government narrowly won the parliamentary elections.

Steep price rises led to a series of food riots in October

Economic analysts say the new finance minister will find it almost impossible to resuscitate the ailing economy without new foreign aid.

The BBC Harare correspondent says Zimbabwe now has the fastest-shrinking economy in Africa: inflation and interest rates are running at 60% a year and the budget deficit is rising.

The economic squeeze is hurting the population and increasing popular opposition to the government - three days of rioting followed steep price rises in basic commodities in October.

As opposition to President Mugabe mounts, speculation is rife in Zimbabwe that he will be persuaded to step down before the presidential elections and a new candidate will emerge to lead the Zanu-PF party.