The African Development Bank (AfDB) has warned Zimbabwe to invest in capital generating projects to halt economic slide and to reduce recurrent expenditure which chews up over 90 percent of its income.
Recurrent expenditure is money spent on goods and services, such as wages, which does not create fixed capital assets.
Capital expenditure, on the other hand, is payment for the creation and acquisition of fixed assets such as building infrastructure.
In its quarterly overview for Southern Africa, AfDB noted that the fiscal sector in Zimbabwe continues to be constrained by high recurrent expenditure requirements against limited revenue flows.
“With recurrent expenditures constituting about 96 percent of total expenditures, the importance of realigning the expenditure mix towards more growth enhancing capital expenditures cannot be overemphasised,” said AfDB.
Since the introduction of the multiple currency system in 2009, Zimbabwe’s bloated recurrent expenditure has met with calls by the International Monetary Fund for government to drastically reduce the civil service wage bill.
Statistics from Treasury show that government employment costs climbed to 81,5 percent this year from 68 percent in 2013.
AfDB also said there was need for Zimbabwe to attract foreign direct investments earmarked to improve government’s revenue and plug the widening current account deficit.
Zimbabwe’s trade deficit is seen widening this year, with the import bill seen reaching $8.3 billion from $7.6 billion in 2013, compared to exports of $5 billion this year and $4.43 billion achieved last year. The current account deficit for the first half of the year was at $1.77 billion.
“The sluggish performance of exports calls for measures to continue to improve the business environment to attract investment, boost productivity and competitiveness beyond the current levels,” said AfDB.- The Source