CHENGETAI ZVAUYA/ TAURAI MANGUDHLA
FINANCE Minister Prof Mthuli Ncube faces a herculean task when he presents the National Budget against the backdrop of a floundering economy and a restive population whose miseries are being exacerbated by a looming famine.
With no external budgetary support, the Treasury has relied on domestic resources to fund government projects. Nearly a third of the population are in urgent need of food aid and Zimbabwe is still recovering from the devastating Cyclone Idai which hit the eastern parts of the country.
Ncube is expected to present the National Budget next month at a time the local currency has lost nearly 80% of its value since its re-introduction in June. Spending power has also declined due to galloping inflation triggered by a wave of price increases of goods and services.
Also hard hit by the financial crunch is the security sector which is underfunded so much that a Parliamentary portfolio committee was told this week that the sector could fail to effectively carry out its mandate due to underfunding. Despite an increase in revenue in the first half of the year to ZWL$5.27bn against a target of ZWL$4.3bn, the cake is still small as the Treasury has to strike a balance between meeting the socio-economic needs and other obligations.
So dire has been the financial situation that the government has been borrowing from the domestic market through the issuance of Treasury Bills to fund growing needs. Permanent secretaries in the ministries of defence and home affairs told a Parliamentary Portfolio committee this week that the Treasury had no capacity to meet their bids.
The two ministries require a combined ZWL$57bn for 2020, but the Treasury proposes to allocate ZWL$2.5bn. The Central Intelligence Organisation (CIO) is also facing similar problems amid information from close sources that the Organisation’s directors fear the specialised unit’s operations could be compromised due to poor conditions of service for operatives.
“Due to the growing cybersecurity and other traditional threats, security services should be adequately funded to counter those threats,” said a senior staffer in the President’s Office who requested not to be named.
To put matters in context, the permanent secretary of the Ministry of Defence, Mark Marongwe, told the Levi Mayihlome-chaired Defence and Home Affairs Parliamentary Portfolio Committee that his ministry faced serious financial problems due to inflationary pressures and a turbulent macroeconomic environment characterised by the lack of foreign currency and a weakening local dollar.
“The prevailing harsh economic environment has affected our budget which has been eroded by inflation as prices of goods have gone up and most of them pegged in forex,” Marongwe said.
“When we made our request for budgetary support, the exchange rate was at 1:1 with the US dollar, now it is trading between 13-15 against dollar.
“Our budget had been exhausted by June this year and we are now relying on monthly allocations from the Treasury to sustain our operations. We had a budget of US$161m which was eroded by inflation, and we had an expenditure of ZWL$411m from January to August this year,” Marongwe explained.
He said the Treasury promised the Ministry US$30m on a monthly basis since June but only US$13m is being availed every month to sustain the departments. Marongwe said the ministry required ZWL$25bn for 2020 to be fully operational, but the Treasury has proposed ZWL $791m, which is just 3% of the Ministry’s requirements. “It should be noted that peace is not that cheap,” he told the MPs.
“Of late the Ministry has been surviving on additional resources availed during the course of the year at the Treasury’s discretion. I feel that we have to be allocated resources that are adequate at the beginning of the year to allow proper planning.”
Marongwe also said that his Ministry was facing challenges in supplying food to the defence forces as it owes US$75m to suppliers. “We had to cut our food rations by 50% due to the non-availability of funds,” he disclosed.
Alois Matongo, acting permanent secretary in the Ministry of Home Affairs, said departments under his Ministry’s wings required resources to combat crime and carry out their constitutional mandate. He said the ministry made a ZWL$32bn bid for 2020, but the Treasury instead proposed to allocate ZWL$1.4bn. Much of the money will go into paying compensation for workers, which include employment costs and grants of ZWL$954m, leaving the ministry operating on ZWL $439m for the whole 2020. He said the ZWL $439m can be exhausted in the first quarter of the year, leaving the ministry paralysed.
Worse, according to Matongo, if priority is given to outstanding commitments, there will be little left to operate on, potentially resulting in outstanding debts ballooning further.
“As you may be aware, currently all transactions that need to be paid in foreign currency require that we use the interbank rate prevailing on the day of transaction,” he explained. “Currently the rate is around USD1:ZWL 13. It means all transactions should be allocated adequate funding to sustain operations until the year end.”
