ZIMBABWE could record a US$700 million budget deficit for 2011 due to wage increases to public servants and grain imports, Finance Minister Tendai Biti said in a half-year budget review on Tuesday.

Last November, Biti presented a US$3.2 billion budget of which US$2.7 billion was expected to come from domestic revenues and the remainder donor assistance.

Biti said the economy is on course to expand 9.3 percent this year, while inflation would probably meet the 4 percent target although the IMF predicted on June 16 that it may reach about 7 percent by December, up from 2.9 percent last month.

Agriculture will expand 19.3 percent, while mining output leaps 44 percent, Biti said in his midterm budget statement to Parliament.

The government will need an extra US$700 million in revenue by the end of the year, he said, compared with the US$500 million fiscal deficit he forecast on July 13.

To narrow the shortfall, the government needs to eliminate 75,000 so-called ghost workers, who don’t do any work and are on the payroll, Biti said. It also needs to raise more funds from diamond sales.

“It is worrying to note that there is no connection whatsoever between diamond exports made by Zimbabwe and the revenue realised,” Biti said. “We need to put in place proper mechanisms to monitor the movement of the diamonds from the point of mining, marketing, export and trade.”

The government plans to spend US$2.7 billion and generate revenue of US$2.25 billion this year, according to the budget presented in November.