Informalisation costs Zim US$1,15bn: Study
THE informalisation of the economy has cost Zimbabwe at least US$1,15 billion between 2020 and 2023 and an accumulative US$3 billion with exchange rate distortions, a research paper has shown.
This comes at a time when industry experts have bemoaned the widening levels of informality across business sectors, which is threatening to choke the manufacturing industry.
While the Government has come up with measures to promote formalisation of businesses, thousands of entrepreneurs operate in the informal economy, which has been credited for employing a majority of people.
The trend is not unique to Zimbabwe as it cuts across Africa and beyond, in the process eroding the revenue base for governments as most informal economy players are not tax compliant.
Most captains of industry and commerce are of the view that the rise of the informal sector, while creating opportunities for ordinary people, is a threat to the established productive sector players and the growth of the country’s economy at large.
Presenting a research paper at the third edition of the Zimbabwe Economic Development Conference (Zedcon) in Victoria Falls this week, titled “The fiscal costs of monetary and exchange rate distortions in Zimbabwe,” University of Zimbabwe researcher, Mr Curren Pindiriri said: “The analysis suggests that informalisation resulted in a loss of at least US$1,15 billion between 2020 and 2023.”
He noted that Zimbabwe has been faced with high inflation and exchange rate premiums.
“Inflation has also continued to trouble the country: year-on-year inflation has surpassed 700 percent by the end of 2023
“By April 2024, the official exchange rate had depreciated by more than 95 percent since December 2023, the parallel market gap was over 50 percent,” Mr Pindiriri added.
“High inflation and exchange rate premiums have a real cost on tax collection, which are often overlooked.”
The paper was authored by Pindiriri, Victor Steenbergen (World Bank), Jimmy Psillos (CZI) and Marko Kwaramba.-chroncile
