The Reserve Bank of Zimbabwe (RBZ) has said that it is essential to formalise the economy considering the huge adverse impact a huge informal sector has on the economy.
RBZ governor, Dr John Mangudya told Business Weekly in an interview that increasing production in the economy and formalising most business activities in the country were the ways through which economic woes could be eradicated. He said:
This economy is more like a dual economy now, it has an informal sector, which is about 60 percent and the formal sector, which is about 40 percent. What is happening is that money comes from the formal to the informal sector and gets trapped there.
Zimbabwe’s economy which is currently grounded following the 2008 meltdown has since 2009 been on a recovery path but has started going South again thereby triggering the emergence of the informal sector as the formal sector collapsed.
Besides trapping money, the informal sector constitutes a soft spot for revenue leakage as it is very hard to tax with some players engaging in tax avoidance and or evasion or both.
More: The Herald