Economist Gift Mugano has warned that the Zimbabwean economy is rapidly approaching a crisis similar to the one experienced in 2008 when the country’s GDP growth plummeted to -17.7% and the Zimbabwean dollar became virtually worthless.
Reacting to the Mid-Term Budget Review Statement presented to parliament on Thursday by Finance, Economic Development and Investment Promotion Minister Mthuli Ncube, Mugano stated that the Treasury boss should consider introducing a supplementary budget to address the financial shortfall caused by the depreciation of the local currency.. Wrote Mugano on X:
The mid-term budget review exposed economic rot
Forget about nice phrases from my esteemed brother [Mthuli Ncube] – consolidating stability…There is nothing to consolidate. The economy is in a dire situation. The economy going towards the graveyard. We are fast approaching 2008.
These are the facts:
1. Contribution of IMTT to total revenue fell drastically from about 16% in 2019 to 3.4% in 2024 – signifying deepening informality and collapse of the formal economy;
2. Percentage of people employed in the informal sector increased from 75.6% in 2019 to 87.7% in December 2023 – signifying deepening informality and the collapse of the formal economy. @MthuliNcube in the NDS1 was targeting to reduce informal employment to 70% (i.e., increasing formal employment to 30%) by 2025. Right now formal employment is sitting at 11.3%;
3. Youth unemployment is standing at 3.5 million – 3.5 million young people are unemployed. The majority of the youths are drug addicts.
4. National debt has ballooned to US$20.8 billion (ZiG287.2 billion/13.78) up from US$18.73 in 2023, i.e., a staggering US$2 billion increase;
5. Close to 50% of the population is living in extreme poverty.
6. Both the education and health sectors are in intensive care units.
7. Close to 25% of the children under 5 are suffering from stunting growth – future generation & human capital is threatened;
8. Businesses executives tell me that they are failing to access forex from banks with some securing 5-10% of their forex requirement notwithstanding the assurances given by the @ReserveBankZIM
9. Exchange rates are running away – we hear banks are using rates averaging ZiG22.30/US$1 while parallel market rates are hovering around ZiG24/US$1.
10. Aggregate demand is plummeting – mari haisi kubatika or kutenderera – which is now a common statement in the market.
Until GOZ and all stakeholders in the ecosystem of policymaking confess the truth about the state of the economy, we will sleepwalk into 2008.
In view of the fact that the Honourable Minister of Finance didn’t table a supplementary budget, the following question is pertinent:
Official exchange shot from ZWL6000/US$1 (i.e. at the time you presented the 2024 budget in Nov 2023) to ZWL33,882 (now equivalent to ZiG13.52) as of 5 April 2024. Resultantly, the national budget which was equivalent to +US$9 billion when it was presented (under assumption of stable exchange rates) was eroded to US$1.68 billion. Isn’t this enough reason to do a supplementary budget?
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