HomeBusiness DigestZimbabwe's balance of payments deficit soars

Zimbabwe’s balance of payments deficit soars

Loughty Dube

ZIMBABWE’S balance of payments position has worsened with reports that the figure now stands at negative US$309 million despite earlier projections that the

payments situation improves.

Zimbabwe’s current account deficit is now expected to decline by 24% of gross domestic product (GDP) compared to the original 2% projected by government for the year 2003.

The acting Minister of Finance and Economic Development Patrick Chinamasa made the revelations when he presented the ministry’s projections during a pre-budget seminar for the 2004 fiscal year held in Bulawayo last week.

“Absence of balance of payments and project support have compromised performance on the capital account where we now project a negative balance of US$309 million by end of year. Given the shortage of foreign currency government finds itself constrained in the implementation of critical services and projects apart from incurring huge external payments,” Chinamasa said.

He said measures set out in the National Economic Revival Plan (Nerp) on promotion of exports, including the introduction of the export support rate, had not achieved the goal of improving the balance of payments situation.

“It would appear measures espoused in Nerp on promotion of exports have not achieved this noble objective and I am aware that the fact that the export support rate has not been reviewed as envisaged in Nerp, has resulted in distortions with other economic fundamentals such as inflation,” Chinamasa said.

He said the budget performance for the first half of the year was satisfactory despite experiencing constraints from rising inflation, shortages of basic goods and services such as fuel and foreign currency.

Meanwhile Members of Parliament took the minister to task over the tax system in the country and said it was too high and was increasing poverty levels.

The MPs called on government to increase the tax band from the current level of $15 000, which they said, was far below the poverty datum line.

MDC MP for Mpopoma Milton Gwetu challenged government to find alternative tax revenue bases instead of using workers as the only revenue base.

“Workers in this country are the major source of government’s revenue base accounting for 90% of its total revenue base while industry and other sources contribute a mere 10% of the total revenue generated by the government and we are saying government should find other means of generating revenue,”Gwetu said.

However Chinamasa said government was considering taking into account the minimum wage and the poverty datum line before setting tax thresholds.

Government is now going around the country gathering information about what individuals feel needs to be included in the 2004 national budget to be presented in parliament on November 20.

Analysts say not much is to be expected from the budget.

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