HomeBusinessGovt revenues shrink as hunger stalks Zim

Govt revenues shrink as hunger stalks Zim

Zimbabwe’s economy stuttered in the first half of the year, with tax collections shrinking amid fears government will fail to meet its budgetary commitments in 2016.


According to latest statistics from the Zimbabwe Revenue Authority (Zimra), collections in the second quarter were $861,83 million against a target of $892,88 million.

In the first quarter, collections were $724,8 million against a target of $861,83 million.

The drop in revenues comes at time the El Niño-induced drought has raised the menace of hunger after government launched in February a $1,5 billion food aid appeal to feed an estimated three million people.

Zimbabwe has also been struggling to attract foreign direct investment after getting $421 million last year from $545 million in 2014 as prospective investors give the country a wide berth due to its unfriendly policies.

Signs that things are unwell were evident last week after government failed to announce pay dates for the civil service.

This, economist John Robertson said, was a clear indication that government was facing challenges and could only be bailed out by new financing.

Robertson said the revenue base had gone down because more people were losing their jobs, which caused shrinkage on the revenue base.

“Zimra is struggling with revenue and Value Added Tax collection is going down and pay as you earn is also going down because more people are losing their jobs,” he said.

Robertson said the ban on imports meant less duty was “being collected at the borders and the revenue is being affected by the down turn and the down turn is causing shrinkage on revenue”.

He said government should lure foreign investors by putting in place investor-friendly policies.

“Investment in the country is still very difficult, it will not come unless government addresses the indigenisation law,” Robertson said.

Former Economic Planning minister Tapiwa Mashakada said the government was experiencing a fiscal policy crisis of unprecedented proportions since independence as dollarisation had deprived authorities of seigniorage revenues that accrue from the printing of money.

“Because budget revenues have been declining while recurrent expenditure has been rising disproportionately, government is facing a huge accumulated deficit of $5 billion since 2013,” he said.

“Government is technically insolvent and hence has no money to pay civil servants wages.”

Mashakada said low growth had reduced the national cake, triggering a cashflow crisis for government.

“Now, given the lack of fiscal space, it is wrong for Finance minister Patrick Chinamasa to try and pay back $1,8 billion arrears when health and education is collapsing,” he said.

“This is irresponsible. How can you pay IMF [International Monetary Fund] when you can’t pay salaries for civil servants?”

Zimbabwe is set to pay its $1,8 billion arrears to the three preferred creditors — the IMF, World Bank and the African Development Bank — by September to unlock fresh capital to reboot the economy.

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