Zimbabwe Debt Crisis
List of Tables
Table 1: Zimbabwe debt figures 1995-1996
Table 2: Zimbabwe deficit figures 2000-2003
Table 3: Possible solutions
EXECUTIVE SUMMARY
In this paper the author shall trace the country’s economic trajectory, starting with Dr Benard Chidzero’s budget presentation of 1986 which he described as “particularly difficult”, and projected a budget deficit of ZW$1 billion. The importance of the huge post-war expectations of the general populace, and the ruling party’s deep desire to retain political power will be tackled in establishing the reason for the consistent worsening of budget deficits and debt since then. The history of the development of Zimbabwe’s economy with a particular emphasis on the impact of Government’s seemingly political rather than economic reasoning, will be explored to expose the causes of huge public sector deficits. It will be argued that in the period under review, key, ill-advised and poorly implemented decisions such as awarding war veterans compensation, engaging in the war in the DRC and the chaotic land redistribution are indicators of politically motivated decisions that severely impacted on the nation’s fiscal solvency. The paper concludes by proffering possible solutions, aiming at not only reducing the budget deficit and debt but at enhancing the country’s overall competitiveness.
1.0 INTRODUCTION
The period under review will be divided into four periods, namely the pre-liberalization period (1985-1990), the structural reforms period (1991-1996), the De-industrialization era (1997-2008) and the post dollarization era, 2009-2010. The first section will show how in the pre-liberalization era, the government was under pressure to improve the socio-economic status of the general populace, and this led to huge demand on the fiscus. This was exacerbated, by the government apparently embracing a Marxist-Leninist ideologies. In the second section it will be shown that fiscal discipline continued to elude Zimbabwe even in
Table 1: Zimbabwe debt figures 1995-1996
Table 2: Zimbabwe deficit figures 2000-2003
Table 3: Possible solutions
EXECUTIVE SUMMARY
In this paper the author shall trace the country’s economic trajectory, starting with Dr Benard Chidzero’s budget presentation of 1986 which he described as “particularly difficult”, and projected a budget deficit of ZW$1 billion. The importance of the huge post-war expectations of the general populace, and the ruling party’s deep desire to retain political power will be tackled in establishing the reason for the consistent worsening of budget deficits and debt since then. The history of the development of Zimbabwe’s economy with a particular emphasis on the impact of Government’s seemingly political rather than economic reasoning, will be explored to expose the causes of huge public sector deficits. It will be argued that in the period under review, key, ill-advised and poorly implemented decisions such as awarding war veterans compensation, engaging in the war in the DRC and the chaotic land redistribution are indicators of politically motivated decisions that severely impacted on the nation’s fiscal solvency. The paper concludes by proffering possible solutions, aiming at not only reducing the budget deficit and debt but at enhancing the country’s overall competitiveness.
1.0 INTRODUCTION
The period under review will be divided into four periods, namely the pre-liberalization period (1985-1990), the structural reforms period (1991-1996), the De-industrialization era (1997-2008) and the post dollarization era, 2009-2010. The first section will show how in the pre-liberalization era, the government was under pressure to improve the socio-economic status of the general populace, and this led to huge demand on the fiscus. This was exacerbated, by the government apparently embracing a Marxist-Leninist ideologies. In the second section it will be shown that fiscal discipline continued to elude Zimbabwe even in
References: 1. Financial gazette 2. IMF September 2004 Country Report STATISTCS APPENDIX. 3. Economic Objectives, Public-Sector Deficits and Macroeconomic Stability in Zimbabwe : Carolyn Jenkins, 1997