Zimbabwe's economic plans unlikely to prompt recovery

Subject

The 2017 budget.

Significance

Finance Minister Patrick Chinamasa presented a 4.1-billion-dollar budget for 2017 to parliament on December 8, aimed at “pushing production frontiers across all sectors of the economy”. This is slightly higher than last year’s 4-billion-dollar spending plan, despite pledges to contain expenditures. Economic growth is projected at 1.7%, up from the 0.6% estimated for 2016, but still significantly down from the 4.8% initially predicted in October. The IMF estimates the economy will contract by 0.3% in 2016 and 2.5% in 2017.

Impacts

• Revenue projections of 3.7 billion dollars may prove unfeasible considering the 9.8% underperformance in 2016.
• Employment costs are unlikely to fall, with further cuts in capital expenditure -- and rising debt -- possible.
• Elevated government borrowing risks a disorderly de-dollarisation of the financial system.