HARARE – Zimbabwe’s government has introduced stringent cost-cutting measures as the rapid devaluation of the local currency wreaks havoc on public finances.
In a circular to government departments, confirmed by the Treasury and seen by Bloomberg, officials were instructed to prioritise spending on critical areas for the remainder of 2024. This comes as the government grapples with a widening budget shortfall and a depreciating Zimbabwean dollar (ZiG).
Spending Cuts and Prioritisation
Treasury Secretary George Guvamatanga outlined several measures to contain costs, including:
- Reducing foreign travel by government officials.
- Halving fuel allocations for government departments.
- Deferring local workshops and non-essential activities.
Departments have been directed to focus resources on unavoidable expenditures, including:
- The 2024 civil servant bonus payments.
- Food-deficit mitigation efforts.
- Agricultural input support for the upcoming farming season.
- Essential utilities.
Currency Depreciation Hits Hard
Guvamatanga described a “substantial mismatch” between revenue inflows and expenditures. Revenue collection often lags by a month, while spending obligations in local currency require immediate settlement, exacerbating the fiscal imbalance.
Zimbabwe’s dollar, which has faced continuous depreciation, has eroded the government’s purchasing power. This has placed severe constraints on non-wage budget support, forcing the Treasury to make tough choices.
Budget Overrun Looms
Finance Minister Mthuli Ncube is set to present the 2025 national budget at the end of November, but preliminary figures already indicate significant challenges. Requests for funding from government ministries have surpassed ZiG 700 billion, far exceeding the ZiG 140 billion budget ceiling.
Economic Implications
The currency crisis highlights Zimbabwe’s ongoing economic instability, marked by high inflation, foreign currency shortages, and limited fiscal space. Economists warn that the spending cuts may further strain essential services, particularly in health, education, and infrastructure.
“The government is stuck between a rock and a hard place,” said Harare-based economist Prosper Chitambara. “While cost-cutting is necessary to maintain fiscal discipline, it risks undermining critical public services and social protection.”
Public Reaction
The public has expressed mixed reactions to the government’s fiscal measures. Civil servants, who are eagerly awaiting their 2024 bonuses, are concerned about further delays or reductions. Meanwhile, opposition politicians have criticised the administration for poor economic management.
“The currency crisis is a symptom of deeper structural problems in Zimbabwe’s economy,” said an opposition MP. “The government needs a comprehensive reform plan, not just ad hoc budget cuts.”
Looking Ahead
As the 2025 budget looms, all eyes are on how the government will navigate its fiscal challenges. Treasury officials are expected to outline further measures to stabilise the economy, but whether these will address the root causes of Zimbabwe’s currency woes remains to be seen.
The crisis underscores the urgency for economic reforms, as Zimbabwe struggles to restore stability and build confidence in its financial system.