ZIMBABWE - INPUT FOR CONGRESSIONALLY-MANDATED

UNCLAS HARARE 000187 SIPDIS SIPDIS EEB/IFD/OMA ANDREW SNOW AND RICHARD FIGUEROA AF/EPS ANN BREITER, ELLIOT REPKO AF/S STEVE HILL E.O. 12958: N/A TAGS: EAID ECON PREL ZI SUBJECT: ZIMBABWE - INPUT FOR CONGRESSIONALLY-MANDATED REPORT ON FISCAL TRANSPARENCY REF: STATE 0016737 ¶1. In Zimbabwe, fiscal transparency and accountability exist in principle but not in practice. There is a range of legislation governing elements of government accounts, including the Finance Act Chapter 23:04, which deals with income tax, duties and license fees, and the Customs and Excise Act Chapter 23:02 that deals with customs and duties. In addition, the Government of Zimbabwe's (GOZ) budget is publicized in a Budget Statement presented to Parliament every year in the form of a Bill that Members of Parliament have an opportunity to debate and approve. The Statement is disseminated as a printed document, "the National Budget" with accompanying Budget Estimates of Expenditure and Income for the current and coming fiscal years. The Statement is also published in the local press the day after presentation in Parliament. ¶2. All revenues and expenditures are included in the Statement, but in recent years, the Reserve Bank of Zimbabwe (RBZ) has taken over many of the functions of government through its quasi-fiscal activities, i.e. activities that should ordinarily be undertaken by government, but in an attempt to keep the budget deficit figures low, are not reflected in government accounts. These activities include, among others, deeply subsidized credit extended in an opaque manner to farmers and industry. In the 2006 Budget, the Minister of Finance at the time stated the GOZ's desire to reduce these extra budgetary expenditures as a way of controlling inflation, but quasi-fiscal activity has, in fact, increased rather than diminished since then. Zimbabwe's weakness on fiscal transparency is due primarily to a lack of will, not necessarily lack of capacity, as quasi-fiscal spending has become a tool of patronage. ¶3. In addition, the budget is eroded by hyperinflation before revenue is collected or expended. (NOTE: The officially acknowledged year-on-year rate of inflation was about 100,000 percent in January 2008; private estimates put the rate in February at roughly three times that figure. END NOTE.) As a result, the budget outturn on expenditure and income is always much greater than the budget estimate. Consequently, for the past several years, the GOZ has presented to Parliament a supplementary budget which is invariably much higher than the original budget. ¶4. There are no USG programs to strengthen Zimbabwe's capacity to develop sound fiscal policies; the Government of Zimbabwe falls under Brooke Amendment restrictions and USG programs are limited to humanitarian assistance. The World Bank has provided technical assistance in the past. ¶5. Zimbabwe volunteered for the World Bank to report on the country's compliance with the World Bank-led Report on Corporate Governance in December 2000. In the past ten years Zimbabwe has not volunteered for the IMF or World Bank to report on the country's compliance with any ROSCs covering fiscal transparency. MCGEE