Zimbabwe to cut budget deficit by half in 2018 as economy slows down 3%

Zimbabwe expects to cut its budget deficit by half next year to 4 percent of the gross domestic product, while economic growth will slow down to 3 percent, according to a Treasury document seen by Reuters on Tuesday.

The southern African nation has struggled to control runaway expenditure, especially on salaries, which accounted for more than 90 percent of the national budget last year.

The country dumped its currency for the U.S. dollar in 2009 because it was wrecked by hyperinflation but it is now running short of dollars as well as quasi-currency “bond note” introduced last year to ease cash shortages.

The Treasury document said the budget deficit should, however, fall from a target of 8.4 percent this year.

“The 2018 budget strategy paper proposes targeting halving the budget deficit to 4 percent of GDP and subsequently to move to a balanced budget by 2020,” Treasury said.

The government expects an improvement in tax collections next year to increase revenues while reducing the share of salaries to 80 percent of the budget, from 85 percent this year.

Without funding from foreign lenders like the International Monetary Fund and World Bank, Zimbabwe has relied on domestic taxes and borrowing from local banks to fund the national budget.

The country’s foreign and domestic debt would increase to $14 billion in 2018 from $13 billion this year, Treasury said.

A U.S. dollar crunch has seen Zimbabwe struggle to pay for imports and has caused acute cash shortages in the economy. On Tuesday the agriculture minister said Harare will ban the importation of fruit and vegetables to preserve scarce dollars.