THE disclosure by Finance minister Patrick Chinamsa last week during the pre-budget seminar for MPs in Victoria Falls that recurrent expenditure is gobbling up a staggering 92,5% of government revenue, with wages chewing 81,5% of income leaving just 7% for crucial capital projects, was sobering.
Zimbabwe Independent Editorial
Chinamasa said expenditures continue to crowd out the country’s capital outlays.
“Over 92% of the (2014) budget is consumptive. This clearly is not a developmental budget,” he said. “The constrained nature of the budget implies underfunding of critical developmental projects and other social services necessary for sustained economic growth.
Such projects include provision of health services, water infrastructures, road rehabilitation and maintenance and power generation, among others.”
Chinamasa further told the legislators it was important to consider the limited fiscal space in crafting the 2015 national budget to be presented later this month. He said revenue from the period January to September 2014 amounted to US$2,73 billion against US$2,82 billion in the same period in 2013, a 3% decline.
Chinamasa said revenue collections as at October 29 2014 indicate underperformance with collections amounting to US$289,4 million against a target of US$336 million.
Zimra collected US$884,5 million in the third quarter of this year against a target of US$972,3 million missing the target by US$87,8 million, representing a negative variance of 9% as government finances continue to dwindle due to a severe liquidity crunch which has fuelled low capacity utilisation, company closures and job losses.
The economy is now technically in recession, although Chinamasa projected a 3,2% growth in 2015. The reality, though, is much grimmer than this. The economy is nose-diving, with widespread company bankruptcies and redundancies.
General economic indicators and the situation on the ground are awful. Life is very harsh for ordinary people as they grapple with deteriorating economic conditions and fight for everything — a decent meal, water, electricity and other basics.
But that’s not the only problem. The trouble is government is at sea on what to do. The wage bill is a reflection of the wider fiscal and economic difficulties.
So government needs to move fast to analyse and rationalise the wage bill.
Even if it’s a complex process, authorities must urgently address the impact of streamlining on quality and efficiency of public service, as well as interaction with the private sector.
Downsizing should be carefully assessed before implementation to avoid unintended consequences. There should be a careful balance between delivery and financial and economic returns of scale back.
Downscaling must be designed to reduce the size workforce to improve the efficiency and quality of the public sector, not just to save money.
This will be part of an overall effort to increase economic growth and cut fiscal deficits.
Overstaffing, ghost workers, a burgeoning payroll and systemic bureaucratic inefficiency are rampant in the public sector.
So government needs to deal with this through measured cuts to reduce the wage bill and make savings to fund capital projects, while ensuring reliable, quality and efficient public service delivery.