Fiscal Reforms, Deficits and Economic Growth in Zimbabwe: A Critique

Abstract

Despite undertaking varied fiscal reforms, most developing countries continued to grapple with budget deficits, low rates of economic growth per capita terms and increasing levels of poverty. This paper, therefore, critically discusses the fiscal policy performance and how it has influenced economic growth dynamics in Zimbabwe since independence in 1980. The revenue, expenditure, institutional and legal reforms that occurring in public finance management in Zimbabwe over the review period were highlighted in the paper. The review of country-based literature and analysis of trends provide evidence of interaction effects between fiscal reforms, deficits and macroeconomic performance in Zimbabwe. The study found that fiscal policy reforms in Zimbabwe evolved from market-intervention policies to market-based policies, and later to market-intervention policies. These reforms were predominantly driven by both internal and external circumstances. Internally, the government sought to achieve social, economic and political goals, while externally, reforms were influenced by natural conditions, global economic and financial developments. The study recommends that for successful and sustainable growth-oriented fiscal reforms, there is need to pay attention to the composition of public spending and to sequence appropriately government expenditure and revenue reforms