Most of Zim budget to go towards salaries

Harare - Zimbabwe's economy is expected to grow by 3.2% in 2015, Finance Minister Patrick Chinamasa said on Thursday, but the bulk of the new budget would have to be allocated to spending on public wages.

Chinamasa issued the projection while presenting his US$4.1bn budget - the same level with that of 2014 - to parliament and after the International Monetary Fund said earlier this month that Zimbabwe's economy was "at a crossroads".

He also revealed that the bulk of the budget - $3.32bn or 81% - would go towards paying public wages, while the balance of $798m will go towards operations, debt service and capital projects.

"The economy needs substantial investments - both domestic and foreign direct investment," Chinamasa said.

Agricultural growth for 2015 is projected to grow by 3.4%, exports by 5% and the manufacturing sector by 1.7%. The agriculture sector has been buoyed by high tobacco output, this year at 216 million kilograms, up from last year's 165 million.

Mining is expected to grow by 3.1% in 2015, driven mainly by nickel, gold, chrome and coal, Chinamasa said.

Zimbabwe, led by President Robert Mugabe since independence from Britain in 1980, has been seeking to climb back on its feet after a decade-long downturn which saw runaway annual inflation peaking at 231 million percent.

While appealing for foreign direct investment, Chinamasa said 4 610 companies had shut down in the past three years, resulting in over 55 000 job losses.

"The economy continues to be dragged down by liquidity shortages, antiquated plant and machinery, cheap imports and high cost of production," he said.

Chinamasa said the budget status is akin to “paying people to sit in their offices without production” and that the budget is mainly "a package of policy interventions to unlock the country’s production potential".

This month the International Monetary Fund said the economy was "at a crossroads", adding that the country could not get fresh financial aid until it services old debts.

Harare is battling to service a $8.3bn domestic and foreign debt.

The IMF had forecast 6.4% economic growth this year but later revised the figure downwards to 3.1%, citing depressed mineral output.

Investors have been scared off by the country's indigenisation laws, which require locals hold majority stakes in all firms.