Staff Writers

FINANCE minister Tendai Biti yesterday presented a $4 billion budget, most of  which will be gobbled up by the government’s huge and unsustainable wage bill that will take up more than 60% of the revenues. The massive imbalance between recurrent and capital expenditures means there is less money for investment or development spending, as most of the revenues would go towards salaries and operating expenses. 

Significant wage bill overruns relative to the budget and a large stock of outstanding domestic payments arrears accumulated by end of 2010 were the main sources of fiscal pressures this year. Government failed to eliminate the fiscal gap through the removal of 75 000 ghost workers from the payroll, reinforcing controls on employment levels, and reducing low-priority transfers to state-owned enterprises. In all budgets since 2009, including yesterday’s, government failed to significantly promote non-wage social and infrastructure expenditure which is essential for sustainable, inclusive growth.

Biti conceded yesterday the disproportionate situation between capital and recurrent expenditures would not help economic recovery to pull the country out of the doldrums after a decade of cumulative decline which resulted in a meltdown and hyperinflation.

“Turning to fiscal performance, total expenditures to September 2011 reproduced the perennial challenge of disproportionate share of recurrent expenditures at $1,68 billion, against capital expenditures of US$0,192 billion,” Biti said.

“Recurrent expenditures continue to be skewed towards employment costs, which were originally budgeted at $1,4billion, but are now projected at around $1,8billion or 63%of the total budget, following the salary and wage review for civil servants effected in July 2011.”

Biti said this would translate into a $400 million expenditure overrun on employment costs, comprising the wage bill for the civil service and grant-aided institutions, pension entitlements and employer contributions for medical aid and National Social Security Authority contributions.      

                                      
“The bill for employment costs, which averaged $121 million per month in the first six months, roseto the current monthlyaverage of $161 million, against the 2011 budget provisionof around $113 million,” he said.

“Consequently, the employment cost outturn to end of September,at$1,21 billion, exceeded the target by around $193million.The above situation where  employment costs account for 63%of total expenditure and net lending, against a budgeted ratioof 53%, is unsustainable,” Biti said. “This outcome has consequentiallycrowded out non-wage expenditures in areas such asinfrastructure development and social service delivery.”

Civil servants are approximately 235 000 representing 1,78% of the country’s 14 million population.
“The implication of this unsustainable equation is that government is spending 63% of its budgetary resources on 1,78% of thepopulation, while the remaining 98,22% have to share thebalance of 37%.”

Biti said the reality of our situation was that there has to be genuine socialdialogue between government and its employees and the formation of a Tripartite Negotiating Forum to craft a socialcontract that will create “a win-win situation for all”.

The minister said further pressure on the budget has been emanating from wasteful expenditures, including foreign and domestic travels by ministers and other top government officials.

“Similarly, there has been increasing pressure emanating fromdomestic and foreign travel, and other current expenditures,such as medical supplies and services, interest on debt, rentalsand other service charges,” he said.

Of the $4 billion, $600 000 million is expected to come from the sale of Marangediamonds. Zimbabwe is set to earn in excess of $2 billion annually in gross revenues following the Kimberley Process Certification Scheme’s decision to allow exports of Marange diamonds this month.

The Ministry of Education, Sport, Arts and Culture received the largest chunk of the budget with a $707,3 million vote, while the Ministry of Higher and Tertiary Education got $296,1 million, Health and Child welfare $345,6 million, Women’s Affairs $10 million, and the Constitutional Development fund $10 million.

“Coming up with this budget was a daunting task given the political environment, economic performance and the global economy,” Biti said.

The minister allocated $10, 5 million to the Ministry of Environment and Natural Resource Management,  Home Affairs received $308 million, Defence $318,2 million, Youth, Indigenisation and Economic Empowerment $48,2 million, Ministry of Public Service $126,3 million, Energy $49,7 million, and Water $71,1 million.

“Careful management of the country’s balance of payments during 2012 will be necessary, especially against a background of the anticipated adverse effects of global economic slowdown on commodity prices, on export demand as well as on capital flows,” he said.

Biti said this, coupled with the country’s limited options for external revenue mobilisation in support of financing government development  programmes, makes it imperative that Zimbabwe’s fiscal stance accommodates the rebuilding of fiscal buffers.

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