Govt spending skyrockets

CLOUDINE MATOLA

Government spending on social protection and infrastructure projects more than doubled to
US$7 billion this year,  up  from US$3 billion in 2018, reflecting a 133.33% increase, Mthuli Ncube, the Minister of Finance, Economic Development, and Investment Promotion, has said.

Ncube said this while presenting his pre-budget proposal for 2024.

“Similarly, government capacity to spend has increased from US$3bn in 2018 to US$ 7bn,

“This enabled the government to spend on social protection and infrastructure projects,” he said.

According to him, among other interventions, the government ring-fenced funds for social protection programmes like support services, social assistance, and social care.

The government has initiated numerous infrastructure development projects since the start of the Second Republic, led by President Emmerson Mnangangwa, some of which are still unfinished.

These include the  construction of the Gwayi-Shangani, Kunzvi, Tuli-Manyange, Vungu, and Semwa dams, as well as the rehabilitation of Beitbridge-Bulawayo-Victoria Falls Road, among many other projects.

Economist Prosper Chitambara, told Business Times that if the government is deploying public funds for capital projects and infrastructure improvements, then more spending is justified.

“An increase in public spending can be good and bad, firstly it can be good if we are spending money on productive expenditure that’s your infrastructure, your capital projects, because it means you are actually enhancing the productive capacity of the economy. And of course also government spending increases aggregate demand in the economy which drives growth,” Chitambara told Business Times.

He added: “Then we also need to look at how that spending is being financed. If it’s largely being financed through  government, government revenues then I think that will be sustainable but if being financed through borrowings, and even the printing of money then its creates sustainability issues,” Chitambara said.

Another economist, Vince Musewe, weighed in saying:“Any increase in expenditure means that the government must find that money somewhere either through taxation or borrowing. If that expenditure is to increase the productive capacity of the economy that is good,” Musewe said.

He added: “Hopefully most of the expenditure will go towards productive activities and job creation. However, if it is merely consumption then there is a problem because the economy will not grow, said Musewe.

Economic analyst, Eric Manyonda, said there was need for transparency on where the government is getting the money to fund the spending.

“It is important thus to ask fundamental questions, where is the government getting its money to fund increased public expenditure?

What is the loan interest ratio if the government borrows to fund increased public expenditure and what does it mean to the sovereign debt and general debt legacy of the country? It is quite essential that economic decisions be made not out of populism but clear fact supported by economic theory.”