Finance minister Mthuli Ncube’s projections that Zimbabwe’s economy will grow by 6% next year have been dismissed by economists as too ambitious as the country is still recovering from the effects of drought.
Zimbabwe’s economy is projected to grow by 2% this year after it was ravaged by the effects of the El Nino-induced drought that cut agricultural output and power generation.
Ncube said in 2025 the economic growth would be accelerated by improved electricity generation and the recovery of the agriculture sector.
Chenayimoyo Mutambasere, an economist said projections that the agriculture sector would grow by 12,8% following a 15% contraction in 2024 were not realistic.
“This projection is largely based on expectations of above-normal rainfall; we don’t see anything in the budget addressing these critical sectors, which are vital for agricultural productivity,” Mutambasere said.
“Without improvements in these areas, the projected growth seems unrealistic.”
She said the assumptions that there would be exchange rate stability and low inflation were also misplaced.
“The exchange rate has more than doubled recently, undermining claims of stability,” Mutambasere said.
“These unrealistic assumptions raise serious questions about the budget’s credibility and its growth forecasts.”
Another economist, Itai Zimunya, said the budget was constrained as it was expected to generate only US$7,5 billion in revenue against US$7,7 billion in expenditures.
Zimunya warned that the deficit would leave critical sectors like health, education, and social welfare underfunded.
“The budget reflects an under-expenditure of U$12,3 billion, meaning social sectors will continue to suffer,” he said.
“The informal sector, which contributes 64% of GDP, remains neglected. “Furthermore, policy inconsistencies, such as non-payment of invoices in the last quarter, only delay inflationary pressures.”
Clemence Machadu, an economist, expressed concern over proposed changes to incentives for companies in Special Economic Zones (SEZs).
Ncube’s budget proposed to introduce a 15% corporate tax and a 10% withholding tax, replacing a five-year tax holiday.
“This move betrays businesses that invested in Zimbabwe based on the promise of tax breaks,” Machadu said.
“It undermines investor confidence and signals that Zimbabwe is a risky investment destination.”
“Legislators must revisit this issue to avoid further harm to the economy.”
Zimbabwe’s long-running currency problems persisted in 2024 as policymakers dumped the Zimdollar in April and replaced it with the ZiG, or Zimbabwe Gold, that has also slumped since its launch.
Ncube said without elaborating further that the government would next year seek to encourage greater acceptance of the ZiG by a sceptical public, that still uses foreign currencies like the dollar for the bulk of local transactions.
- Additional reporting by Reuters