ZIMBABWE'S fiscal landscape has been marked by significant challenges, including a 10% budget deficit and restricted access to external financing.
On January 22, Finance, Economic Development, and Investment Promotion minister Mthuli Ncube, participated in a critical discussion alongside prominent figures, such as British economist and journalist, currently the head of Bloomberg News Economics Stephanie Flanders, deputy managing director of the International Monetary Fund (IMF) Gita Gopinath, American economist Kimberly Clausing, Qatar Finance minister Ali Ahmed Al Kuwari and London Stock Exchange Group CEO David Schwimmer.
The discourse revolved around the intricate balance of upholding public services, while fostering investment growth and managing debt levels.
This analysis will dissect Ncube’s contribution to the discussion, juxtapose it with his interview on CNBC Africa, and elucidate the implications for Zimbabwe's economic trajectory.
The World Economic Forum (WEF) annual meeting in Davos is a pivotal gathering that convenes global leaders from various sectors, including government, business, academia, and civil society.
Established in 1971, the forum aims to address pressing global challenges and drive collaborative efforts toward sustainable economic growth and social progress. In 2025, the WEF annual meeting took place from January 21 to January 24, bringing together influential figures to discuss key issues such as climate change, technological advancements, and geopolitical stability.
This year's discussions focused on fostering innovative solutions to enhance global resilience and promote inclusive development in an increasingly interconnected world.
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In addressing the overarching question posed to policymakers on how to design and implement fiscal strategies that revive growth and raise tax revenues, while managing a fiscal squeeze, Ncube emphasised a pragmatic approach rooted in fiscal discipline.
Given Zimbabwe's challenging economic backdrop, characterised by high debt levels (65% of GDP, up from 30% pre-Covid-19) and macroeconomic instability, his commentary is particularly salient.
Quasi-cash budgets
Ncube articulated the necessity of adopting quasi-cash budgets, which essentially involves a stringent monitoring of cash flows with minimal borrowing.
This approach allows the government to prioritise essential expenditures, while curtailing unsustainable debt accumulation.
He highlighted the importance of domestic resource mobilisation through innovative taxation methods, such as the introduction of the Intermediated Money Transfer Tax (IMTT) and health-targeted sin taxes.
These measures not only augment tax revenues but also align fiscal policy with public health objectives. Furthermore, Ncube's assertion that these initiatives should commence with a quasi-cash budget framework underscores a fundamental economic principle: The imperative of fiscal responsibility.
By minimising reliance on external borrowing, Zimbabwe may stabilise its macroeconomic environment, thereby instilling confidence among investors and creditors.
A diplomatic necessity
A crucial element of Ncube's discourse was the acknowledgment of the need for a debt restructuring exercise, which he described as inherently political and necessitating diplomatic engagement.
The current composition of Zimbabwe's external Public and Publicly Guaranteed (PPG) debt, comprising US$6 billion in bilateral debt, US$3,1 billion in multilateral debt, and US$3,6 billion owed to the Reserve Bank of Zimbabwe (RBZ) presents a formidable challenge.
The proposed debt restructuring is not merely a technical exercise; it is a strategic manoeuvre aimed at re-establishing Zimbabwe’s credibility in the international financial community.
Ncube's emphasis on convening stakeholders and creditors to create a platform for dialogue signifies a proactive approach to addressing the debt crisis.
The delineation of three reform channels — governance, land, and economic reforms — provides a structured framework to tackle these multi-faceted issues.
Staff-monitored programme
Ncube alluded to an impending Staff-monitored programme (SMP) with the IMF, set to commence in February 2025. This programme, lasting 12 months, is pivotal for several reasons.
Firstly, it serves as a mechanism for Zimbabwe to demonstrate its commitment to fiscal discipline and structural reforms to international creditors, including the IMF, World Bank, and European Investment Bank.
The SMP is likely to entail stringent policy measures aimed at stabilising the economy and restoring fiscal balance. The success of this initiative hinges on the government's ability to implement recommended reforms effectively, which may include reducing the budget deficit, enhancing revenue collection, and improving public expenditure management.
Enhancing the business environment
In his dialogue with CNBC Africa in Davos, Ncube articulated a vision for enhancing Zimbabwe’s business environment through the establishment of the Zimbabwe Investment Development Agency (Zida).
This agency aims to streamline regulatory processes and simplify licencing procedures for foreign investors. By creating a one-stop shop for investment, Zimbabwe seeks to attract much-needed foreign capital, which is essential for economic recovery and growth.
Moreover, Ncube’s focus on maintaining currency stability through the introduction of the Zimbabwe Gold and Zinc currency reflects a strategic response to hyperinflationary pressures and currency volatility.
The multi-currency regime, alongside a gradual transition to a single domestic currency, is designed to instil confidence among investors and facilitate secure transactions.
Addressing debt sustainability
Ncube's discussion on debt sustainability highlights the critical need for Zimbabwe to contain fiscal deficits, while advocating for global financial system reforms.
The recognition of high borrowing costs relative to growth rates speaks to the urgent need for a robust fiscal strategy that aligns public spending with economic growth trajectories.
The implications of Ncube's remarks extend beyond immediate fiscal measures; they necessitate a comprehensive rethinking of Zimbabwe's economic model.
By advocating for reforms that enhance tax revenues and improve public financial management, Zimbabwe can work towards a more sustainable fiscal framework that supports long-term growth.
Digitalisation
In his interview, Ncube underscored the importance of embracing digitalisation as a catalyst for economic growth and inclusivity. The integration of technology into economic frameworks can enhance efficiency, improve service delivery, and broaden the tax base.
By fostering an environment conducive to digital innovation, Zimbabwe can leverage technological advancements to drive economic progress.
While Ncube’s discourse touched on several critical areas, there are notable aspects that warrant further exploration. For instance, a more in-depth analysis of the social implications of fiscal policies, particularly regarding public service provision amidst budget constraints, would enrich the discussion.
Additionally, an examination of the potential impact of external geopolitical factors on Zimbabwe's economic policy could provide a more holistic view.
Ncube's insights during the January 22 discussion and his interview with CNBC Africa reflect a nuanced understanding of the complexities facing Zimbabwe's fiscal landscape. By advocating for fiscal discipline, debt restructuring, and enhanced business environments, he outlines a path forward for the nation.
However, the successful implementation of these strategies will require unwavering commitment, both domestically and internationally.
As Zimbabwe navigates this fiscal squeeze, the interplay between prudent economic policy and the socio-political landscape will be pivotal in shaping its economic future.
As the World Economic Forum in Davos concluded on January 24, Ncube had the opportunity to address critical economic issues during a discussion on January 22.
In his capacity as chairperson of the committee of Finance Ministers for Africa, Ncube advocated for reforms that resonate with the continent’s developmental goals.
The dialogue initiated at this prestigious forum served as a vital platform for Zimbabwe to engage with international stakeholders, fostering collaborative efforts to tackle the myriad challenges the nation faces.
In conclusion, while the path forward for Zimbabwe remains fraught with obstacles, it is also rich with opportunities for reform and growth.
By adopting a comprehensive approach to fiscal policy rooted in discipline, innovation, and collaboration Zimbabwe can navigate its way toward a more sustainable economy.
- Equity Axis is a financial media firm offering business intelligence, economic and equity research. The article was first published in its latest weekly newsletter, The Axis.
