WASHINGTON DC —
Former Finance Minister Tendai Biti says lack of fiscal management will plunge Zimbabwe into an economic crisis with both the local and foreign debts set to get out of control within the next few months.
In an exclusive interview with VOA Studio 7, Biti said the economy is still fragile and at the epicenter of this crisis is the shrinking revenue base and uncontrolled spending.
He said it is not surprising that the Zimbabwe Revenue Authority (ZIMRA) failed to meet its revenue targets in the third quarter due to the shrinking economy.
“There is no expenditure management at all. In fact, the party in power at the present moment has to monetize electoral promises in respect of wage increases and so forth, and all those put serious fiscal pressure on the budget. So you have got a trilemma. The trilemma being of high demand, huge expectations but no fiscal leg room,” Biti said.
ZIMRA said it collected $897 million between July and September against a target of $905 million. It attributed the shortfall to company closures and firms that are scaling down due to lack of capital to revamp operations.
It further said the economy continued to face challenges such as erratic power supplies, liquidity constraints, depressed industrial capacity, among other issues.
ZIMRA further said the economy continued to face challenges such as erratic power supplies, liquidity constraints, depressed industrial capacity, among other issues.
Company tax collections were 3 percent short of the target and mining royalties were 39 percent below projections. Individual tax collections rose 23 percent after ZIMRA extended its net, but the closure of companies is expected to have a huge impact on such taxes.
The country’s economy is expected to grow by 3.4 percent this year, down from earlier projections of 5 percent. Finance Minister Patrick Chinamasa is set to present the country’s annual budget next month.
Zimbabwe recently recorded a staggering budget deficit of $74 million.