Analysis : Zimbabwe 2017 Budget

Zimbabwe economy: Quick View – 2016 budget presented
The finance minister, Patrick Chinamasa, presented his 2017 budget to parliament on December 8th.
Analysis
When the main tax change in a national budget is a 5% levy on airtime and mobile broadband charges, the country is either doing very well or exceptionally poorly. In Zimbabwe’s case it is the latter. The country’s financial weekly, the Zimbabwe Independent, summarised the budget with the headline “Broke government introduces new tax”.
In the first ten months of 2016, government spending was US$520m (16%) above budget, while revenue was down by US$283m (9%). The budget deficit for 2016 is estimated at US$1.2bn, or some 8% of GDP. Mr Chinamasa claims that conditions will improve in 2017 because of a modest (5%) increase in revenue and a 10% reduction in government spending. Spending is currently dominated by employment costs, totalling US$3.15bn in 2016-equivalent to 89% of total revenue, leaving just US$350m of collected revenue for spending on operations and the capital budget. Next year the finance minister says that employment costs will fall to 73% of total revenue while spending on capital projects is projected to decline by 38% to US$520m. Spending on operations is expected to fall by more than 20% to US$394m. Consequently, he expects the budget deficit to narrow sharply to US$400m, or 2.7% of GDP. However, Mr Chinamasa has missed his targets in all three of his previous budgets, and The Economist Intelligence Unit expects the deficit to be close to the 2016 level.
Meanwhile, debt continues to rise. The government admits to an external debt of US$7.5bn, of which US$5.2bn is in arrears, as well as US$3.7bn (equivalent to 26% of GDP) in domestic debt-a tenfold increase since 2013. Domestic debt-service costs exceeded 22% of total revenue in 2016, up from 3% in 2013. The 2017 budget assumes that this will fall from US$750m in 2016 to only US$180m in 2017, but this is clearly unrealistic.
Source :
Economist Intelligence Unit

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