FINANCE Minister Tendai Biti said Wednesday he had been forced to cut his 2012 budget from US$4 billion to US$3,4 billion, blaming poor revenue inflows from diamonds from the eastern Marange fields.
Presenting his Mid Term Fiscal policy in Parliament, Biti said of the US$600 million which was expected from diamond sales this year, only US$41,6 million had been received during the first half of the year.
"We thought by June about half of the amount would have been achieved. I am very worried about the amount coming from diamond sales which is way below what we anticipated. It is a very worrying situation," he said.
The Marange diamonds have remained a source of constant bickering in the coalition government with Biti and his MDC party claiming proceeds from sales of the gems were being diverted away from treasury.
But one of the companies targeted for criticism by Biti, the Chinese-owned ANJIN Investments, accused him of trying to find scapegoats for his own mistakes. The company claimed Biti had based his US$600 million projection on the assumption that a carat of diamond was worth US$1,300 when, in fact, its average value is US$60.
“It is either he is untruthful, incompetent or illiterate. He made the blunder and miscalculated. He must be man enough and admit that he made a mistake,” Anjin board member Munyaradzi Machacha said last month during a visit to Marange by EU envoys.
“He (Biti) is scapegoating companies like Anjin for his miscalculations. He is persecuting a cash cow because he made a blunder.”
Meanwhile, Biti also cut his growth forecast to 5.6 per cent from the 9.4 per cent projected earlier blaming a poor harvest, lack of donor funding and policy inconsistencies.
Zimbabwe registered expansion of 9.3 per cent in 2011, the third straight year of growth after a decade of economic decline that peaked in 2008 when inflation hit 500 billion per cent.
However, the economy looks to be losing its momentum as the coalition government struggles to attract donor funding, while bickering over policy discourages foreign investment.
Biti said government revenues had stopped growing, a sign that the economy now needed foreign investment to expand production and boost jobs, especially in the manufacturing and mining industries.
"The first half of the year has been the most economically challenging in the last 40 months," Biti told parliament in a mid-year budget review.
"This economy needs foreign direct investment to increase this little cake into a bigger cake that will generate jobs."
Biti said the government would increase taxes on fuel and wheat imports in a bid to shore up state revenues, adding that this would not put pressure on inflation, which he still expects to be below 5 per cent by year-end.
He said government wages, at 74 per cent of total expenditure, were unsustainable.
Investors have stayed away, rattled by a government drive to force foreign miners to surrender at least 51 per cent shares to black Zimbabweans.
Uncertainty over the date and conduct of elections due within the next year, has also unsettled investors given Zimbabwe's history of violent and disputed polls.