The Government of Zimbabwe is implementing an expenditure management program for the gradual containment of the budget deficit for the next two years, Minister of Finance and Economic Development Patrick Chinamasa revealed.
Chinamasa reveals this on Zimbabwe’s main message to the International Community as the country reach out to investors.
“Government is implementing a comprehensive expenditure management programme which will see the gradual containment of the Budget deficit from 2017 levels of -14% of GDP to -3.5% of GDP by end of 2018, and subsequently capping it to below -0.3% by 2020, in line with best practices and financing capacity of the economy,”
Chinamasa’s message reads.
“Attaining the above targets will primarily depend on the progressive reduction of the share of Employment Costs in the Budget, to initially 70% in 2018, 65% in 2019, and below 60% of the total Budget by 2020.”
The message to the world goes on to say that economic costs will be targeted down to create fiscal space to accommodate financing of the development budget and other operations of the government.
“As the economy grows, employment costs will be targeted down to average around 30% of the total Budget. This will create fiscal space to accommodate financing of the development Budget and other social protection operations of Government.,” the message reads.
“Similarly, containment of the budget deficit will also require sustainable, financing of agriculture, through enhancing the role of private financiers.”
Zimbabwe’s fiscal deficit, which widened to US$1.8 billion in 2017 from $US1.4 billion is expected to be reduced of US$675.8 million.
Funders, which include the World Bank (WB) and the International Monetary Fund (IMF) have in the past blamed the government’s fiscal deficit for the economic woes Zimbabwe is facing.
World Bank Senior Country Economist for Zimbabwe, Johannes Herderschee is on record saying that the problem with Zimbabwe is that the fiscal deficit is too large for the country.
“Financing the deficit with an overdraft has destabilised the financial system leading to cash shortages and unpredictable payment of imports,” said Herderschee.
William Murray from the IMF communications department said, “As we noted, and we have been noting, the Zimbabwean economy faces severe challenges. An unsustainable fiscal deficit has led to severe liquidity shortages, created inflationary pressures, and threaten the viability of the financial sector and Zimbabwe’s exchange rate regime.”
Although the government is planning to reduce the fiscal deficit, Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya said the problem that the country is facing is financing the deficit.
Mangudya said that the country, which was under sanctions has not been able to access international lenders to finance the deficit.