The Government of Zimbabwe has initiated a series of reforms to restore macroeconomic stability, according to a new Public Finance Review (PFR) released by the World Bank. The report emphasizes the importance of strengthening fiscal policy to guide Zimbabwe towards a sustainable medium-term fiscal path.
Titled "Anchoring Macroeconomic Stability through Fiscal Policy," the PFR examines Zimbabwe's public finances from 2019 to 2023. It supports the government's fiscal consolidation efforts by identifying ways to improve expenditure and revenue mobilization, aiming for efficiency and equity in fiscal policies. This approach is expected to stabilize the macroeconomic environment and foster economic growth and job creation.
Eneida Fernandes, World Bank Country Manager for Zimbabwe, stated, "The PFR emphasizes the World Bank's commitment to providing timely and responsive support to the Government of Zimbabwe and is a testament to our strong and ongoing partnership. This comprehensive analysis of public finance will guide our efforts to assist the government in improving domestic revenue mobilization, enhancing efficiency, and ensuring pro-poor outcomes."
The review recommends measures for creating fiscal space and aligning Zimbabwe's fiscal accounts with prudent trajectories. Stabilizing prices and addressing exchange rate distortions are highlighted as strategies that could boost government revenue significantly. The report notes that over $4.5 billion was lost between 2020 and 2023 due to monetary distortions. Enhancing price stability could help recover these inflation-related tax losses.
To increase tax revenue efficiently, potential reforms include streamlining corporate tax incentives, strengthening mining, property, and wealth taxation, aligning health excise taxes with international standards, and improving tax administration through digital technologies.
Efficiency in public spending is crucial for supporting fiscal consolidation. The report identifies opportunities for improving allocative efficiency in areas like healthcare and capital investments. Procurement system improvements, such as e-Procurement use, offer potential savings. Streamlining civil service operations could also enhance efficiency.
Improving expenditure policy progressivity through targeted social protection spending is another focus area. A national "social registry" could aid in better targeting current social protection systems while enhancing climate resilience.
The PFR underscores that effective fiscal policy can anchor macroeconomic stability by ensuring a credible national budget and maintaining a stable currency. These measures are seen as pivotal steps toward achieving higher growth rates, significant poverty reduction, and advancing Zimbabwe’s development goals.