Zimbabwe’s 2025 Mid-Term Budget Review: What You Should Know
- Macroeconomic Stability: The review highlights significant progress in macroeconomic stability, driven by currency reforms and improved foreign currency inflows
- GDP Growth Target: Aims for a 6% GDP growth target, focusing on sectors such as agriculture and electricity supply
- Fiscal Discipline: With a budget deficit limited to 0.4% of GDP and only 35% of the budget spent by mid-year, the government emphasizes fiscal restraint
Harare- The 2025 Mid-Term Budget and Economic Review, themed "Building Resilience for Sustained Economic Transformation," sets the stage for Zimbabwe’s fiscal and economic trajectory in the second half of the year.
Presented amidst cautious optimism, the review highlights significant strides in macroeconomic stability, driven by currency reforms, fiscal discipline, and robust foreign currency inflows.
With the economy rebased to US$45.7 billion and the ZiG currency holding steady, the government aims to sustain a delicate recovery while targeting 6% GDP growth.
However, challenges such as high inflation, a lagging revenue-to-GDP ratio, and reliance on volatile external inflows reflect the fragility of this progress.
GDP Rebasing to US$45.7 Billion
The GDP has been rebased to US$45.7 billion, increasing the official size of Zimbabwe’s economy by over 30%. This statistical adjustment improves ratios such as debt-to-GDP and revenue-to-GDP.
While this makes the economy appear healthier on paper, it does not reflect real improvements in productivity or living standards. The improved ratios might reduce the government’s urgency to pursue structural reforms, potentially delaying necessary action to address underlying economic weaknesses.
Revenue-to-GDP Ratio Drops to 15%
The revenue-to-GDP ratio has fallen to 15%, meaning the government collects less tax relative to the economy’s new size. This drop highlights inefficiencies in tax administration and the dominance of the informal economy.
To address this, the government might increase taxes on the informal sector or expand VAT, but such moves could spark inflation or unrest if not implemented with care.
6% GDP Growth Target Retained
The government retains its 6% GDP growth target, banking on agriculture, improved electricity supply, and macroeconomic stability.
This ambitious target faces risks from softening global demand and declining mineral prices. If growth falls short, budget projections could falter, leading to spending cuts that disrupt fiscal plans and economic momentum.
ZiG Stability at US$1:ZiG26.7
The ZiG currency is stable at US$1:ZiG26.7, supported by tight monetary policies and reduced fiscal spending, contributing to lower monthly inflation.
This stability boosts business confidence and price predictability, but it’s fragile. A lack of demand for ZiG or the resurgence of parallel markets could undermine these gains, requiring sustained policy discipline.
Annual Inflation at 92.5% (June)
Annual inflation stands at 92.5% as of June, though it’s expected to moderate.
High inflation reflects past volatility, and lingering expectations of price increases could drive wage demands, elevate interest rates, and reinforce reliance on USD over ZiG, complicating monetary policy efforts.
Foreign Currency Receipts Up 30.2% (US$6 Billion)
Foreign currency receipts rose by 30.2% to US$6 billion, fuelled by gold exports, remittances, and private loans.
This strengthens reserves and liquidity, supporting exchange rate stability. However, dependence on external factors like gold and remittances leaves the economy exposed to global economic shocks.
Projected Current Account Surplus of US$621.7 Million
A current account surplus of US$621.7 million is projected, driven by restrained imports and robust foreign inflows.
This is a positive signal amid global trade challenges, potentially bolstering reserves. Yet, long-term sustainability hinges on diversifying exports and boosting local production to reduce reliance on external flows.
Public Debt at US$21.5 Billion (44% of GDP)
Public debt is US$21.5 billion, or 44% of GDP, with the ratio improved by GDP rebasing.
While the lower ratio creates some borrowing space, the actual debt burden especially arrears remains heavy. International lenders may hesitate until arrears are cleared, and domestic debt servicing could crowd out development spending.
Budget Deficit at 0.4% of GDP
The budget deficit is limited to 0.4% of GDP, reflecting fiscal restraint.
This discipline helps control inflation and borrowing, signalling responsibility to lenders. However, it risks underfunding key sectors like health or infrastructure if revenue collection weakens.
Only 35% of Budget Spent by June
By June, only 35% of the budget had been spent, due to tight controls or disbursement delays.
This slowed project implementation and economic activity in the first half of the year. A spending surge later could destabilise the economy if not carefully managed.
Ease of Doing Business Reforms Underway
Reforms like fee adjustments and streamlined processes aim to improve the business climate.
Effective implementation could attract investment, particularly if paired with transparent taxes and regulations, enhancing Zimbabwe’s competitiveness in the region.
Medium-Term Revenue Strategy Planned
A strategy is in place to expand the tax base and formalise the informal economy.
This could boost revenue, but risks pushback from informal traders unless accompanied by consultation and compliance incentives, balancing fiscal needs with social stability.
Support for Veterans, Youth, and Women Empowerment
Small allocations fund livestock schemes and workspace support for veterans, youth, and women.
These have limited economic impact but carry symbolic weight. Linking them to productive sectors could enhance their value, though their scale restricts broader influence.
Renewed Interest in Stock Markets (ZSE & VFEX)
Increased listings on the Zimbabwe Stock Exchange (ZSE) and Victoria Falls Stock Exchange (VFEX), especially USD-based assets, reflect growing corporate confidence.
This could deepen capital markets and improve business funding options, provided liquidity improves, supporting long-term economic growth.
Formulation of NDS2 Underway
The National Development Strategy 2 (NDS2), with ten priority areas, aims to succeed NDS1 and address execution gaps.
Success requires robust monitoring and stakeholder inclusion to ensure effective delivery, potentially correcting past weaknesses and driving development.
Therefore, Zimbabwe’s 2025 Mid-Term Budget Review showcases macroeconomic stability through currency reforms, fiscal discipline, and external sector gains. However, real growth remains elusive, with heavy reliance on gold, remittances, and donor support exposing vulnerabilities. GDP rebasing improves debt metrics but doesn’t address limited capital access or arrears clearance needs.
For sustainable progress, the government must prioritise structural reforms, diversify the economy, and enhance the business environment. Monetary policy will likely stay tight to preserve ZiG stability, with cautious support for productive sectors. While stability is a step forward, tackling deeper challenges is essential for long-term prosperity.
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