Economists warn of fiscal missteps

LIVINGSTONE MARUFU AND CLOUDINE MATOLA

Zimbabwe’s 2025 national budget, presented by Finance Minister Professor Mthuli Ncube, has drawn sharp criticism from economists and business leaders, who argued that it failed to address the country’s pressing economic challenges.

They said the national budget represents a missed opportunity to navigate the nation out of its persistent economic turmoil. Instead, the budget introduces increased taxes that burden an already struggling population and fail to incentivize formal economic activity.

The Zimbabwean economy continues to suffer from rising informalization, with many businesses collapsing or struggling to meet operational costs. This has led to a diminished contribution from corporates to the national fiscus, forcing the government to rely heavily on individuals through a raft of new taxes. However, these measures appear poorly targeted, as informal traders often operate through mobile or online platforms, making tax enforcement ineffective.

Business leaders and analysts warn that the overreliance on taxation of individuals without expanding the formal economic base risks deepening poverty.

Christopher Mugaga, CEO of the Zimbabwe National Chamber of Commerce (ZNCC), criticized the budget’s lack of practical solutions, stating, “The over-reliance on squeezing individuals and formal businesses ignores the challenges of an economy where over 80% of employment is in the informal sector.”

The government’s projection of 6% economic growth in 2025 has been met with skepticism.

Analysts cite a range of obstacles, including power outages, currency instability, unpredictable rainfall, and subdued commodity prices.

Mugaga noted:“The projection of 6% growth is overly optimistic. The structural challenges facing our economy, including collapsing industries and inadequate power infrastructure, make such a target difficult to achieve.”

Moreover, economists highlighted discrepancies in fiscal priorities. For instance, large allocations to the President’s Office and the Defense Ministry contrast starkly with underfunding for critical sectors such as energy and transport, further undermining the growth narrative.

Former Finance Minister Tendai Biti described the budget as “shallow, dishonest, and out of touch,” criticizing its focus on taxing vulnerable populations while failing to address systemic issues like energy shortages and inflation.

Biti also questioned the viability of the revenue targets, pointing out that a 150% increase in projected revenue for 2025 lacks a realistic foundation.

“The regime’s reliance on a volatile local currency for budgetary calculations obscures the true extent of economic mismanagement,” Biti asserted.

He warned that unchecked government expenditure and corruption-driven projects, such as command agriculture, would further destabilize the economy.

Economist Professor Gift Mugano expressed concern that the 2025 budget is inflationary, given its sharp increase in spending.

“If the economy is projected to grow by 6%, why has the budget increased by 150%? This mismatch will fuel inflation and exacerbate exchange rate instability,” Mugano said.

He also criticized the misallocation of resources, emphasizing that power generation infrastructure, a critical need for the economy, received minimal attention.

“The government should focus on reducing taxes, tackling corruption, and creating a conducive environment for production,” Mugano said.

Analysts have underscored the absence of meaningful reforms in the budget to address Zimbabwe’s structural economic weaknesses. Victor Boroma, an economic analyst, highlighted that the budget is heavy on new taxes but offers minimal incentives to formalize the economy or drive growth.

“Zimbabwe’s tax regime is among the highest in the region, increasing the cost of doing business and pushing more players into the informal sector,” he said.

FBC Securities echoed these sentiments, warning that businesses face rising costs due to utility price hikes, raw material shortages, and a punitive tax regime.

The firm noted that sectors dependent on imports remain particularly vulnerable to supply chain disruptions and currency volatility.

Despite the criticism, some analysts noted positive elements in the budget, such as increased funding for irrigation, which could boost agricultural productivity.

Another economist Dr. Prosper Chitambara described the budget as a “mixed bag,” acknowledging efforts to mobilize resources for irrigation while criticizing the lack of tax relief measures for businesses.

However, the consensus remains that the budget falls short of addressing the fundamental challenges facing Zimbabwe’s economy.

Persistent structural deficiencies, inadequate public sector reforms, and a punitive tax environment continue to undermine the country’s growth potential.

The 2025 National Budget has exposed the deep economic and fiscal challenges Zimbabwe faces.

With inadequate measures to formalize the economy, alleviate poverty, or tackle critical infrastructure gaps, the government risks deepening the economic crisis.