HomeLocal NewsCabinet orders austerity measures

Cabinet orders austerity measures

CABINET has instructed government ministries and departments to immediately adopt new austerity measures. The cost-cutting measures 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 scrambles to contain runaway expenditures and a widening budget deficit.

By Wongai Zhangazha

However, the cost-cutting measures are unlikely to bring much fiscal relief to President Robert Mugabe’s troubled government, which has not acted on an unsustainably high civil service employment costs bill for 2016, currently gobbling up around US$3,21 billion, a figure accounting for 91,7% of government’s total revenues.

Finance minister Patrick Chinamasa, in his mid-term fiscal policy review statement in parliament yesterday, said cabinet, at its 18th meeting of June 13 2017, had directed government ministries and departments to adopt expenditure cost-cutting measures in a bid to reduce the unsustainable fiscal deficit.

This comes after Chinamasa revealed that budget expenditure for 2016 amounted to US$4,9 billion against planned expenditures of US$4 billion, an expenditure overrun of US$902,2 million.

“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 — who last year was blocked by Mugabe and cabinet from implementing the same measures after publicly announcing them — said the implementation of additional expenditure cost-cutting measures presents further opportunity to curtail non-priority spending, as well as re-balancing Budget expenditures towards growth-enhancing ZimAsset infrastructure expenditures 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.”

A technical committee comprising the Secretary to the Treasury and the Deputy Chief Secretary responsible for Modernisation of Government in the Office of the President and cabinet and other key officials from Treasury, the Office of the President and cabinet, and the Reserve Bank, has been set up to speed up the implementation of the cost-cutting measures.

Chinamasa said cabinet had also limited government borrowing by taking into account Section 11 of the Reserve Bank Act which limits the central bank’s overdraft lending to the state to 20% of the previous year’s revenue.

Cabinet also agreed that outstanding government debt, as a ratio of gross domestic product, should not exceed 70% at the end of any fiscal year.

Chinamasa said government continues to implement the recommendations of the civil service skills audit, maintain the freeze on salary reviews and filling of vacancies and rationalisation of benefits.
“This allows room for additional fiscal space to support service delivery, and growth-enhancing infrastructural spending,” he said.

“The implementation of the public service wage bill rationalisation measures, approved by cabinet in November 2015, has had a positive impact of reducing government’s baseline employment costs bill, from a monthly level of around U$262 million in 2015 to around US$252 million in 2016.

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

Chinamasa said 55% or US$1,2 billion of the overall civil service wage bill of US$2,2 billion had funded the delivery of essential educational, health and agricultural services in the country.

“The 2016 employment costs bill also accommodated outstanding December 2015 employment costs of US$138,4 million, as well as payments for the 13th cheque amounting to US$177,8 million for the previous fiscal year,” he said.

“Therefore, the level of the wage bill continues to present challenges related to cash flows, which has periodically necessitated the rescheduling of pay dates of the public service, grant-aided institutions and pensioners.”

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