Mugabe's govt continue with reckless spending

Mugabe's govt continue with reckless spending
Published: 21 July 2017
GOVERNMENT is continuing with its reckless spending spree - with President Robert Mugabe's office leading the way, overspending by US$43 million - as its unsustainable budget deficit scaled almost US$1 billion in 2016, official figures presented by Finance minister Patrick Chinamasa yesterday show.

This comes as Zimbabwe's total debt, as at end December 2016, quickened to US$11,3 billion; with the external debt at US$7,3 billion, and domestic debt US$4 billion.

Government's disastrous extravagance - which led to a massive US$900 million budget deficit - and a revenue shortfall of US$347,8 million, forced Treasury to borrow US$1,4 billion on the domestic market, crowding out the private sector which needs credit to invest and create jobs.

Government spent US$4,9 billion under a US$4 billion national budget, hence a US$900 million deficit. It collected US$3,5 billion from taxes, reflecting an overall revenue shortfall of US$347,8 million. Operating without its own currency and hence lack of monetary sovereignty and associated quantitative easing options in an imploding economy, government is now relying on issuing Treasury Bills (TBs) and bonds to cover its widening budget deficit amid a liquidity crunch and cash crisis.

Government relied on the domestic market for funding via instruments such as TBs and bonds, even though the TBs did not entirely provide for the deficit. Of the US$2,1 billion TBs and bonds issued in 2016, US$356,3 million financed the budget deficit, while US$1,7 billion paid outstanding legacy debt.

The US$346,3 million TBs, with average maturity of 160 days, and bonds, worth US$10 million, with average tenure of three years, funded the deficit.

Although government has been honouring its obligations upon TB maturity, as demonstrated by a total of US$1,1 billion repaid timeously, fears of defaulting as the deficit widens are mounting. Mugabe, who surpassed his travel allocation by US$23 million last year mainly due to his gallivanting, led the way in overspending. According to official figures, the Office of the President and Cabinet had a budget of US$179 936 000 last year, but spent US$223 013 213 - a US$43 million budget overrun - further piling pressure on a virtually empty Treasury.

Despite the prevailing peace, the Ministry of Defence overspent by US$88,2 million to US$446 319 801. The Ministry of Agriculture overshot its budget by a staggering US$772 178 832. Its budget was US$145 091 000. The Mines ministry, allocated US$5,9 million, spent US$119 million.

There was also US$134 million unbudgeted expenditure directed towards capitalising technically insolvent state-owned enterprises and parastatals. "Government has accumulated US$1,07 billion worth of supplier's and service providers arrears to a number of domestic creditors who delivered goods and services to various line ministries and departments," he said. "These relate to such utilities' obligations as those for water and rates, electricity, telephony and other ICT-related services, among others"

Notwithstanding gains of the rationalisation of the public service, the overall employment costs bill for 2016 remained unsustainably high at US$3,21 billion, accounting for 91,7% of total revenue .

"Budget expenditures for 2016 amounted to US$4,902 billion, against planned expenditures of US$4 billion.

Resultantly, expenditure overruns of US$902.2 million ensued," Chinamasa said.

"The major driver behind the overall US$902,2 million budget overrun were expenditure interventions in support of recovery of agriculture. In this regard, such expenditures totalled US$615 million, an over-expenditure of US$549 million on the original 2016 budget provision of US$66 million."

Support towards operations and maintenance for ministries and government departments, Chinamasa said, incurred excess expenditures of US$220 million. "This policy pathway remains critical given that wage expenditures accounted for 65,5% and 91,7% of overall Budget expenditures and revenues, respectively in 2016," he said.

"Accordingly, rationalisation of the public service establishment is necessary, complemented by institution of expenditure management measures."

A sharp spike in expenditure prompted cabinet to instruct ministries and departments to immediately adopt cost-cutting measures which will, among other outcomes, see a slash in foreign travel per diem allowances, fuel allocations, and telephone and cellphone allowances, as the debt ridden and broke government desperately tries to contain the runaway deficit.

"The cabinet directive is re-affirming previous positions taken in 2015 under which Treasury has progressively instituted various expenditure rationalisation measures related to: standardisation of fuel allocation across ministries; review of telephone and cellphone allowances; review of foreign travel per diem allowances; and use of government vehicles," Chinamasa said.

"Measures on reducing consumptive expenditures are in recognition of the reality that overall Budget expenditures are way beyond levels that can be supported by our current limited fiscal revenues."

Chinamasa said the implementation of austerity measures presents further opportunity to curtail non-priority spending, as well as re-balancing budget expenditures towards infrastructure expending and improved public service delivery.

"The cabinet directive on budget expenditure rationalisation requires: cost-cutting measures and improved revenue generation from line ministries for approval by cabinet; and fiscal deficit containment measures," he said.

"Hence, the cabinet directive calls on line ministries, departments, as well as independent commissions to urgently proffer costed expenditure cost-cutting measures that assist in reducing the current fiscal imbalances and improving value for money."

Although the current account deficit, benefitting from improved exports and declining imports, narrowed down to a deficit of US$552 million, from US$1,5 billion recorded in 2015, Zimbabwe continues reeling from a liquidity crunch and cash shortages caused by falling production, low exports and high imports, and poor a balance-of-payments position, among other factors.
- independent
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