Financial Economics and Financial Literacy

The partisan politics model of public policy is based on the view that the ideological preferences of the ruling parties are significant drivers of the level of government spending. Political parties that favor redistribution increase government spending whilst parties that prefer the working of the market system reduce government spending. A combination of the preferences of voters and political parties shape policy outputs such as public spending (Wittman, 1983; Keech, 1995). The opposing school attributes that public spending is shaped by variable economic, technological and demographic imperatives ( Cusack , 1997). Partisan politics is at best marginal .  Majority of voters or parties’ grassroots support is made up of lower income groups and labor which prefer a large and active state. The upper income groups and capital prefer a minimized role of the state in shaping the market operations and outcomes. Zanu PF preferred a state heavily engaged in regulating th...

Zimbabweans are familiar with budget statement presented by the Minister of Finance in the parliament every year but unfortunately the public has never received detailed financial statements after expenditure. Zimbabweans usually know the amount which is allocated to certain ministries such as health, education social welfare but the public has never received financial reports detailing how the money was used. The lack of financial reporting means that the public has no information to make the government accountable. Accountability has been viewed since time immemorial as a channel for ascertaining the use of power by an individual or an organization that has been entrusted with the task of performing prescribed tasks (Premchand 1999).  Kautilya wrote a manual on bureaucracy before the Christian age, he observed that human nature was disposed to acquire public money for private gain. He wrote: “Just as it is impossible not to taste honey or poison that one may find at the tip ...

Budget deficits have become perennial in Zimbabwe and l was prompted to check through in history, and it has been the pattern since the 1980s. Budget deficits are the chief cause of Zimbabwe’s ongoing financial crisis which consist of cash short shortages and liquidity crises. The quotation from Peter Robinson in 1999 testifies that budget deficits has been a permanent feature of the fiscal policy ever since 1980. “ Zimbabwe is currently in an unprecedented economic crisis. Some recent factors have contributed to this crisis, but the origins lie in the accumulation of debt due to large deficits, which have been an endemic feature of the national budget for the last 20 years. Generally domestic borrowing, particularly in recent years treasury bills, has financed deficits. Thus while foreign debt service has risen due to currency depreciation, the main focus at present is on the rapid pass through of increased interest rates (needed to curb in inflation) back to the budget in the ...

Fiscal policy must be designed to maintain or achieve the goals of high employment, reasonable degree of price stability, soundness of foreign account, and an acceptable rate of economic growth however this is not the case in Zimbabwe.  Finance is a is a crucial component of activities of public affairs, especially as resources can be used only once. Fiscal policy can be defined as the means of determining financial policy aimed at deriving income through manipulation of demand for goods and services. The fiscal policy of a government is reflected in its taxation and expenditure policies as articulated by the budget. Fiscal policy is the regulation of the economy through government spending and taxes. Lower tax rates are incentives for work and investment. In Zimbabwe, currently tax base is falling due to company closures and high unemployment which result in lower government revenue on the contrary government expenditure is increasing. The increase of government expendit...