Zimbabwe will trim spending and increase tax revenue next year and relax laws that require black citizens hold majority stakes in companies as it looks to restore confidence and boost economic growth, Finance Minister Patrick Chinamasa said.
The measures will reduce the southern African nation’s fiscal deficit to 3.5 percent of gross domestic product next year from an estimated 9.4 percent in 2016, he told lawmakers during his budget presentation Thursday in the capital, Harare. It proposed to confine laws that force companies to transfer 51 percent stakes to black Zimbabweans to the platinum and diamond industries only, he said.
“The unsatisfactory performance of the economy is being underpinned by declining domestic and foreign investor confidence levels, against the background of policy inconsistencies in an uncertain and uncompetitive business environment,” Chinamasa said. The budget “focuses on consolidating the fiscus in order to restore and maintain macroeconomic stability,” he said.
Chinamasa announced the 2018 fiscal plan a week after he was reappointed by President Emmerson Mnangagwa. Former leader Robert Mugabe resigned two weeks ago after an army-led coup ended his 37-year rule in which agricultural output collapsed due to forced repossessions of commercially productive farmland. Zimbabwe abandoned its currency in 2009 due to hyperinflation and the economy has halved in size since 2000.
Other highlights from the budget include the following:
- Revenue will increase to $5.07 billion next year from an estimated $4.34 billion this year as the government seeks to increase tax revenue 17 percent to $4.3 billion
- Zimbabwe will reduce spending to $5.7 billion from an estimated $6.05 billion in 2017
- It will cut employment costs to $3.24 billion from $3.39 billion
- The Finance Ministry forecasts total debt of $14.5 billion, or 74 percent of gross domestic product, declining to 66 percent of GDP by 2020
- The country will cut 3,739 posts to help to reduce costs, and will freeze vacant public-service positions to contain the wage bill
- GDP is forecast to expand 4.5 percent in 2018 from an estimated 3.7 percent in 2017, accelerating to 5.6 percent in 2019 and 6 percent in 2020
Zimbabwe holds the world’s biggest platinum reserves after South Africa and also has chrome, gold, iron ore, coal and diamonds. While mining is the largest source of foreign currency, fresh capital dried up under the law forcing foreign, white-owned companies to cede 51 percent of their businesses to black Zimbabweans or the government. Anglo American Platinum Ltd., Impala Platinum Holdings Ltd., and Sinosteel Corp. are among companies operating there.