Mishma Chakanyuka, Staff Writer 
ZIMBABWE’S government could face significant challenges funding its spending in 2024, with dwindling access to local financing due to the country’s deepening dollarisation, research firm Imara Investing in Africa (Imara) has warned.
In a recent note, Imara argued that widespread adoption of the US dollar has severely restricted the government’s ability to print money to finance expenditures, as was done in the disastrous period of hyperinflation between 2008 and 2009.
While this enforced fiscal discipline initially fostered trust, subsequent attempts to create parallel currencies undermined that progress.
“The straight jacket of dollarisation is now much tighter than ever before, making it far harder for the government to fund its expenditure through local means such as taxation,” Imara said.
This challenge is compounded by a shrinking formal sector, which traditionally generates tax revenue.
Imara estimates the 2024 budget, presented in Zimdollars despite exceeding 70 percent dollarisation, translates to roughly US$10 billion in spending – hardly a reduction from previous years.
The report finds the budget document itself indicative of “desperation,” with a “myriad of new taxes” proposed to plug the financing gap.
This comes as the Old Mutual Investment Group (OMIG) has warned that Zimbabwe’s fragile economic balance hinges on the government’s ability to walk a tightrope of maintaining its strict fiscal and monetary policies.
In a recent note, the research firm acknowledged the potential inflationary impact of the 2024 budget measures in the medium term. However, it warned that only “disciplined execution of the proposals” and maintaining a narrow budget deficit would ultimately restrain inflation.
Ultimately, “the authorities’ ability to stay the course on the tight fiscal and monetary policy stance will be a key driver for overall macroeconomic balance,” the OMIIG emphasised.
Treasury and central bank authorities have introduced measures to curb government spending and shrink the budget deficit.
Additionally, control of money supply and rampant inflation have shown early signs of success.
Tight monetary measures have drawn criticism from those feeling their pinch.
Economist Prosper Chitambara echoed this concern, stating, “No economy can thrive in an environment of high inflation.”
Chitambara further highlighted the importance of bringing annual inflation below 10 percent, aligning with the regional average in the Southern African Development Community.
He also emphasised the critical role of low and stable inflation in attracting investment, a crucial element for boosting the economy.
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