GOVERNMENT’s budget deficit — which scaled about US$1,4 billion by June — is seen ballooning to US$2,3 billion this year, more than three times the projected figure as authorities fail to rein in spiralling expenditure set to top US$8 billion by year-end, a pre-budget strategy paper by Treasury has revealed.
By Kuda Chideme
The document informs the 2019 National Budget scheduled to be announced next month.
This comes at a time the country is burdened by a total national debt of US$16,9 million. Domestic debt accounts for US$9,5 billion, up from US$275,8 million in 2012, with external debt standing at US$7,4 billion. Inflation has shot up officially from 4,9% to 5,39%, although developments on the ground are painting a more precarious picture as prices of basic commodities have more than doubled in recent weeks.
This year’s total expenditure had been set at US$5,7 billion, with US$4,58 billion for current expenditures and US$1,16 billion for capital outlays. This was premised on projected revenues of US$5,07 billion, to give a fiscal deficit of US$672,2 million, which is 3,5% of the country’s gross domestic product.
According to the Treasury paper, revenues are projected to be US$5,7 billion, in line with the first-half performance. This entails US$4,7 billion tax revenues, US$466 million non-tax revenues, US$434 million retained revenues and US$100 million grants.
Revenue collections for the first half of the year amounted to US$2,51 billion against a target of US$2,21 billion, resulting in a positive variance of US$300 million, representing a variance of 13% of budgeted revenue.
Total expenditures during the same period stood at US$3,72 billion against targeted expenditure of US$2,6 billion as President Emmerson Mnangagwa’s government went into overdrive on a spending spree ahead of the July general elections.
Support towards the agriculture input support schemes (US$616 million) and grain procurement, (US$81 million); and capital expenditure towards roads of (US$225 million), and dam construction of (US$87,2 million), as well as capitalisation of public institutions of (US$212 million).
“The huge deficit for the period to June, 2018 is as a result of mainly unbudgeted expenditures and this calls for urgent reforms in order to contain the expenditures achieve the fiscal consolidation objective and create fiscal space for developmental budget and social services expenditure,” the paper says.
“The fiscal deficit, a major cause of macro-economic instability and financial sector vulnerability, is targeted at US$1,5 billion (5,2% of GDP) in 2019. This is achievable upon adoption and implementation of measures to begin regaining control and management of budget expenditures over the period January 2019 to December 2021”.
Financing of the deficit was through Treasury Bill issuances by the Reserve Bank amounting to US$548,3 million, while non-bank amounted to US$736,7 million.
Furthermore, lending to government by the central bank through the RBZ overdraft facility increased by US$478,2 million for the period January to June 2018. Government also financed itself through accumulation of arrears, which stood at US$115,8 million as at June 2018.
The runaway central bank lending to government is projected to reach US$2,5 billion, which is 64,6% of the previous year’s revenues.
“Pressure will also come from Treasury Bill maturities in the short term (2018 to 2020) of US$4,1 billion, which is 55% of the total TBs maturities of US$7,5 billion to year 2033.
The above position has far-reaching consequences in the economy in terms of government crowding out private sector lending. Additionally, continued payment of Government obligations through an overdraft will also worsen the liquidity challenges in the economy,” reads the Treasury paper.
The economy, reeling from a fiscal crisis, is currently in turmoil due to foreign currency market volatility and a wave of price increases, reflecting rising inflationary pressures and chaos.