STAFF WRITER
Treasury lurched into a fresh fiscal crisis during the first six months of the year after public spending outstripped revenue collections by $1,4 billion, piling pressure on the fiscus, official figures have shown.
Zimbabwe is currently saddled with a huge domestic and external debt. The country is currently engaging the international community for budgetary support and fresh lines of credit. The precarious situation has crowded out private sector capital projects as government struggles to upgrade its key infrastructure. In the absence of cheap long term capital from international financial institutions like the World Bank, Zimbabwe now relies on its central bank to issue debt instruments like treasury bills to finance expenditure. The International Monetary Fund has, in the past, warned government against this practice saying it could stifle economic growth in the short to medium term.
The overrun came at a time government was under pressure from civil servants demanding wage increases to offset the rising cost of living.
Now the incoming Finance minister faces a herculean task of ensuring fiscal discipline against competing demands such as funding of the summer crop.
This budget overrun was almost five times as much as the budgeted $305,4 million deficit and comes after total expenditure and net lending for the first half of the year amounted to $4 billion against a target of $2,5 billion. This gave a variance of $1,5 billion.
Differences between expenditure targets and actual figures were within reasonable limits in the first two months of the year, but almost doubled compared to budgets in the four months from March to June.
Current expenditure gobbled $2,4 billion, being $300 million above budget while goods and services cost Government $1,6 billion from a budget of $1,4 billion. Employment costs totalled $1,3 billion compared to a budget of $1,2 billion.
This came as Government awarded nurses, teachers and doctors salary hikes ahead of elections in a move widely seen as populist and projected to drive inflation by a sudden leap in spending power and eventually widen the budget deficit to unprecedented levels as revenue collections are seen failing to match expenditure. Government also added to its employment bill after recruiting police, nurses and soldiers just before the elections.
The country also held its crucial harmonised election on July 30, which according to the Zimbabwe Electoral Commission’s 2017 statements would cost $270 million.
Programmes and institutions chewed a combined $168,4 million, more than three times the budgeted $50 million while foreign travel almost doubled at $20 million for the six months compared to a budget of $12 million.
Although interest on debt was largely within expectation at $105 million, interest on domestic debt was $105,8 million compared to targets of $67,2 million while interest on foreign debt was only $3,8 million from the envisage $45,6 million. The spike in interest rates is mostly attributed to maturities on Treasury Bills experienced at the end of the second quarter. In its credit, Government is yet to default on TBs due payments but its consistent issuance of the paper is largely blamed for the excess liquidity which is not matched by physical cash. Recently government issued a 5-year paper to PSMI for the clearance of its arrears. Total TB stocks is estimated at around $4,5 billion.
Current transfers, comprised of pensions and foreign transfers or subscriptions, closed the first half at $638,8 million versus a budget of $559,8 million.
Capital expenditure and net lending totalled $1,6 billion against targets of just $426,1 million. The bulk of the figure was capital expenditure at $1,3 billion compared to a budget of $327,9 million.
Vehicles plant and mobile equipment expenses were $15,9 million more than the targeted $5,8 million while $260 million was spent on building acquisitions which was more than double the $125 million initially set aside.
Capital transfers gobbled a whopping $864,6 million against a budget of $181,4 million while net lending and investments stood at $316,8 million from a target of $98,2 million. Despite a budget of only $30 000, $104 million was spent on feasibility studies during the period under review.
In terms of collections, total revenue including retained revenue, transfers and prepayments met targets at $2,443 billion compared to budgets of $2,427 billion.
Total revenue, including Zimra retention beat targets by $300 million to close the reporting period at $$2,5 billion while total government revenue were also $300 million above budget at $2,5 billion.
Tax revenue amounted to $2,4 billion compared to budgets of $2,2 billion. Tax on income and profits amounted to $903,8 million versus initial projections of $745,7 million.
Corporate tax stood at $354,4 million versus projections of $210 million. Custom duties were $20 million above target at $196,9 million while excise duty also breached targets by $50 million at $451,7 million.
