Anchoring Macroeconomic Stability Through Fiscal Policy in Zimbabwe
The Zimbabwean government has recently carried out a series of important reforms aimed at lasting restoration of the macroeconomic stability in Zimbabwe. To ensure these reforms, according to the World Bank’s New Public Finance Review (PFR) (World Bank Today), the Treasury is to identify ways to strengthen its fiscal policy to help move Zimbabwe towards a sustainable medium-term fiscal approach.
The PFR title is “Anchoring macroeconomic stability through fiscal policy“The public fiscal performance of Zimbabwe between 2019 and 2023 was considered. In addition, it supports the fiscal integration efforts of the Zimbabwe government by identifying policy options to improve spending and income mobilization to create fiscal space, improve efficiency and enhance equity considerations. This could help Zimbabwe move towards a more sustainable medium-term fiscal pathway, stabilize the macroeconomic environment, and support sustainable economic growth and job creation.
“The PFR stresses the World Bank’s commitment to providing timely and responsive support to the Zimbabwean government, which is a testament to our firm and ongoing partnership. This comprehensive analysis of public finance will guide our efforts to help the government improve domestic revenue mobilization, increase efficiency and ensure poverty outcomes.
The PFR recommends taking several measures to create a fiscal space and returning Zimbabwe’s fiscal accounts to a prudent trajectory. The report stressed that stabilizing prices and eliminating exchange rate distortions can significantly and rapidly increase government revenue. World Bank analysis shows that Zimbabwe’s finance ministry lost more than $4.5 billion between 2020 and 2023 due to currency distortion. Improving price stability can help quickly recover inflation-related tax losses. Potential reforms to effectively and equitably increase tax revenue include simplifying corporate tax benefits, strengthening mining, property and wealth taxes, keeping healthy excise tax consistent with international standards, and using digital technologies to improve tax management.
Improving the efficiency of public spending is critical to supporting fiscal consolidation and achieving long-term sustainable and inclusive growth. It is possible to increase the efficiency of government allocation to increase the value in areas such as health care and capital investment. Improvements in procurement systems, including the use of electronic processes, also bring a large number of opportunities for efficiency savings. The Zimbabwean government’s work assessment report shows that efficiency in public service management is also key, which shows an opportunity to simplify civil service services. The graduality of expenditure policies can also be improved through more and better targeted expenditures for social protection. The operation of the national “social registry” can help improve the goals of Zimbabwe’s current social protection system and contribute to improving climate resilience.
The PFR shows that fiscal policy may be a key foundation for macroeconomic stability, ensuring a reliable, effective national budget and assisting with stable and competitive currencies. In common, this will lead to higher growth, reduce significant poverty and take a major step towards achieving Zimbabwe’s development goals.
Distributed by Apo Group on behalf of the World Bank Group.
