The World Bank Senior Country Economist for Zimbabwe, Johannes Herderschee said that the problem with Zimbabwe is that the fiscal deficit is too large for the country. The fiscal deficit occurs when a government’s total expenditure exceeds the revenue that it generates, excluding money from borrowing.
Last year the country incurred a $1.4 billion budget deficit despite being one of the most taxed countries in Africa.
“Financing the deficit with an overdraft has destabilised the financial system leading to cash shortages and unpredictable payment of imports” said Herderschee.
Zimbabwe is under cash shortage with many queueing for cash on banks.
The World Bank economist said that one of the options for moving forward was the retention of foreign exchange.
“Retention of foreign exchange by exporters is expected to boost exports” said Herderschee.
“I see a tremendous opportunies for exports.”
Zimbabwe recorded a trade deficit of $614 million in the first three months of this year hence there is need to increase exports. Herderschee presented this at the Confederations of Zimbabwe Retailers in Harare yesterday.
The financial crunch has arguably led to the rise of the black market as the most needed cash is being sold on the streets, reminiscent of the crisis of 2008.
