Fiscal Discipline and Budget Processes: Evidence from Zimbabwe

Abstract

Zimbabwe is one of the least fiscally performing countries in Sub-Saharan Africa, with some fiscal outcomes for years 2009 to 2019 being unsatisfactory. The IMF 2020 Article IV consultation report on Zimbabwe suggested that fiscal and monetary slippages experienced in 2018 and 2019 resulted in macroeconomic imbalances in 2019 and greater part of 2020. The study adopted a qualitative approach to investigate the relationship between fiscal discipline and the budget processes in Zimbabwe. Informed by the fiscal illusion theory as well as the formative fiscal federalism theory, the study established that the growth in fiscal indiscipline in Zimbabwe leads to widening fiscal deficits, increased direct budget financing requirements on the domestic market and unsustainable debt profile. Fiscal indiscipline is driven by weak budget institutional frameworks, party institutionalisation and economic sanctions.To enhance fiscal discipline, strengthening and implementation of existing fiscal institutional frameworks and engagement of the international community on sanctions are necessary. Publication of agreed fiscal targets for credibility purposes may help. Promoting increased savings during booms for consumption smoothening in periods during periods of droughts, cyclones and pandemics is encouraged.

Keywords: Fiscal Deficit,Fiscal Discipline, Budget Process, Economic Development, National Budget, Public Debt, Zimbabwe

JEL Classification: E02, E61, H73, H77, H83, K42