Zim among debt risky countries

ZIMBABWE is among high risk countries due to its high national debt of about $10 billion, with the country having gone for over a decade without paying its obligations to creditors, a new report has revealed.

Source: Zim among debt risky countries – NewsDay Zimbabwe September 1, 2016


African Economic Outlook (AEO) in its latest report said in high risk countries an effective tax administration requires a highly-qualified and well-equipped staff that can work without political interference.

In Zimbabwe, the taxation system is viewed as being overpriced with many analysts stating that the pricing mechanism is the highest in the region.

As a result, according to AEO, Zimbabwe joins Burundi, Cameroon, Central African Republic, Chad, Djibouti, Ghana, Mauritania, Sao Tome and Principe, and Sudan as a high risk debt sustainable country.

The country’s pricey tax regime has seen the Zimbabwe Revenue Authority (Zimra) failing to collect arrears owed by companies as businesses struggle to raise revenues.

“The task of tax collectors is eased if the tax burden is relatively low, if the number of taxes is relatively small and if taxation law is clear, relatively simple and gives tax collectors minimal discretionary power to determine tax liability,” AEO said.

“Reducing corruption and improving the quality of public spending, such that people perceive taxes as essential for financing public goods and services, also facilitates tax collection.”

The recently released Africa Economic Outlook Report of 2016, shows that measures to limit indebtedness differ between countries and include spending cuts, tax rate increases, tax base broadening and improved tax collection.

“On the spending side, the narrower fiscal space increases the importance of using spending effectively to improve provision of basic services for the whole population and boost economic growth. Lower energy prices make it politically easier to phase-out energy subsidies and several countries have already implemented such measures,” AEO said.

“On the revenue side, a balance must be struck between different objectives, in particular creating more revenues and avoiding adverse effects on economic growth. Broadening the tax base by reducing tax preferences and exemptions and improving tax administration is generally preferable to increasing statutory tax rates.”

In Zimra’s first half report for 2016, gross collections for amounted to $1,65 billion, which was 6,03% below the target of $1,75 billion, and 9,31% below the same period last year.