By Emelia Sithole-Matarise | Reuters |
Zimbabwe’s new government promised to re-engage with international lenders, curb spending and attract investors to revive its battered economy, as it launched its first budget since the fall of Robert Mugabe on Thursday.
Finance Minister Patrick Chinamasa also said the government would amend indigenisation laws, limiting a 51-percent local ownership requirement to just the platinum and diamond sectors.
The laws were designed to increase black Zimbabweans’ share of the economy but were opaque and open to abuse – to the detriment of foreign investor confidence. The government would also defer further a 15 percent export tax on raw platinum to 2019, Chinamasa said.
“As we focus on recovery of our economy, we must shed misbehaviours and acts of indiscipline which have characterised the past,” he told parliament.
To cut a budget deficit projected at about 10 percent of GDP this year, he said the government would retire all civil servants aged over 65 and close some overseas diplomatic missions.
Government spending ballooned under Mugabe – part of the patronage machine that kept him in power for 37 years – with more than 90 percent of the budget going on civil servant salaries, leaving precious little for the investment needed to boost growth.
Chinamasa said the new government is aiming for a 2018 budget deficit of below 4 percent of GDP, which some analysts said was an ambitious goal at a time when the country is expected to hold a national election.
“The major (cost-saving) measures are good but are not robust enough for the government to create enough savings to help it meet its budget requirements,” Harare-based economist Gift Mugano told Reuters.
He said Chinamasa had failed to meet budget forecasts in past years and there was little in his budget speech to indicate 2018 would be any different.
Chinamasa has also not clarified what the government will do with any public funds illegally stashed abroad by individuals and companies if they were returned under a three-month amnesty window announced by Mnangagwa last week.
Mnangagwa, who as sworn in as president on Nov. 24 following the de facto military coup, has promised to tackle corruption that had become endemic under Mugabe’s 37-year rule. Zimbabwe ranks 154th out of 176 countries in Transparency International’s Corruption Perception Index.
In the latter half of his rule, Zimbabwe’s economy collapsed, especially after violent and chaotic seizures of thousands of white-owned commercial farms.
The issuance of billions of dollars of domestic debt to pay for a bloated civil service also triggered a collapse in the value of Zimbabwe’s de facto currency and ignited inflation.
Mnangagwa’s most pressing tasks will be to patch up relations with donors and the outside world and work out a deal to clear Zimbabwe’s $1.8 billion of arrears to the World Bank and the African Development Bank.