BASED on the 2015 3,2% GDP growth projection, Finance minister Patrick Chinamasa expects to collect US$4,1 billion for next year’s national budget. This translates to about 28,1% of nominal GDP of US$14,594 billion.
Zimbabwe Independent Editorial
Expenditures of US$4,115 billion are accordingly targeted, resulting in a small deficit of US$15 million in a cash-budget situation.
However, Chinamasa’s budget figures presented to parliament this week show his total appropriation would amount to
US$4 578 400 000, with statutory funds contributing US$541 503 750 and other funding sources, mainly donors, underwriting
US$852 362 781. This means, all things considered, Chinamasa expects US$5 972 266 531 in total resources.
Given the current state of the economy, this shows that Chinamasa is bubbling with misplaced optimism — bordering on naivety or deception — which makes him believe he will raise such unrealistic amounts even if companies are shutting down and the economy is nose-diving.
First, the 3,2% GDP growth forecast for 2015 is problematic given the current technical economic recession and the incessant spiral of company closures, job losses and tax revenue decline.
By Chinamasa’s own admission, more than 4 600 companies have closed down since 2011, resulting in over 55 400 jobs losses. More companies are set to close shop, particularly after the festive season. Inevitably, government revenues will further dwindle as the tax base increasingly shrinks. Second, Chinamasa failed in his recent budget statement to clarify the damaging indigenisation policy which has triggered capital flight and is scaring away investors.
Last year, Africa received over US$82 billion in FDI, with Mozambique getting over US$8 billion or 10% of FDI inflows to Africa. Zimbabwe only got US$400 million yet is has vast natural resources and human capital.
FDI has hovered around US$400 million in the last three years as the country paid the price for policy inconsistencies and uncertainty. In the region, Zimbabwe is languishing at the bottom in terms of FDI inflows with countries like Zambia and even Swaziland ahead, while Mozambique, Angola and Botswana are tops.
Prioritising infrastructure rehabilitation and development for attracting investment is good, but FDI is more critical. Chinese and Russian deals are welcome, but those are long-term projects, if not pie in the sky.
Although Chinamasa hinted this week government will finally retrench part of its 236 000-strong bloated civil service next year to reduce its unsustainable wage bill, that’s an emergency measure, not a solution.
Of the running 2014 budget, US$3,32 billion — which represents 82% of total expenditures — will be on employment costs, leaving a balance of US$798 million for operations, debt service and capital development programmes.
Recurrent expenditures will continue to dominate overall outlays accounting for 92% of total costs, leaving about 8% for capital development programmes in 2015. This situation is as undesirable as it is unsustainable.
The real solution is for government to come up with a holistic economic recovery plan to address this situation, but in the meantime authorities must just learn to live within their means even though, unlike individuals or companies, they are supposed to have instruments to deal with budget overruns and debt financing. It’s time to get real.