ZIMBABWE'S finance minister, Tendai Biti, has averted a major showdown with unions by announcing wage increases for civil servants.

Until yesterday all civil servants earned the same salary of $100 (R800) a month.

But addressing parliament yesterday, where he presented his mid-term budget, Biti said he was increasing allowances and working towards restoring "proper salaries".

In mapping the way forward to rebuilding the country's shattered economy, he said the era of "low wages, closed mines, poor harvests, bad roads and under-performing industries" was gone.

Biti said measures put in place since the unity government was formed in February would enable the economy to "graduate from limping - to sprinting".

He said Zimbabwe's new-found fiscal discipline would see the country record GDP growth of 3,7percent.

Tourism, mining and manufacturing would be "the key drivers" of the envisaged recovery.

When he announced that the government had decided to "put a tombstone on the Zimbabwe dollar" - MPs loyal to President Robert Mugabe booed.

Biti responded by saying that until the economy was sound again "we have no right to talk of the return of the Zimbabwe dollar". The current multi-currency arrangement would remain in force, he said.

Biti also thanked South Africa for honouring its pledge to help bail out Zimbabwe with R300million.