HARARE – Zimbabwe’s budget deficit shot up to $1.4 billion, or 10 percent of national output, in 2016, above previously revised estimates, its finance minister said on Thursday.
Patrick Chinamasa told parliament the shortfall arose from unbudgeted subdidies to farmers, food imports following a devastating drought and support for loss-making state-owned companies in the southern African state.
The deficit increase far exceeded an initial projection of $150 million, Chinamasa told parliament. In his annual budget address last December, he said the deficit had risen to $1.18 billion but on Thursday he revised the figure upwards again.
The government initially set aside $66 million to finance farmers last year but ended spending $615 million, with most of the money borrowed from domestic banks and the central bank, according to Chinamasa.
This year’s deficit, earlier forecast at $400 million, is also expected to increase by nearly $120 million this year due to a maize subsidy, Reuters calculations show – a scheme that critics of President Robert Mugabe say will be open to abuse and saddle a troubled economy with more debt.
Chinamasa reiterated that a rebound in agriculture would see the economy grow by 3.7 percent in 2017 while revenues, at $3.7 billion, are expected to be in line with the budget forecast.
“The outlook for 2017 is very positive,” he said in a half-year budget review statement to parliament.
The IMF has urged Zimbabwe to slash public sector wages, now at more than 90 percent of the national budget, reduce farm subsidies, improve transparency in the mining sector and reach an agreement on the compensation of white farmers as a precursor to new funding from foreign lenders.