‘Budget surplus not priority’

20 Nov, 2020 - 00:11 0 Views
‘Budget surplus not priority’ Minister Mthuli Ncube

eBusiness Weekly

Golden Sibanda

Treasury is not necessarily fixated on achieving surpluses when funding Government programmes through the national budget, but avoiding unsustainable budget deficits that negatively impact on the country and citizens in future, Finance and Economic Development Minister Professor Mthuli Ncube says.

Minister Mthuli revealed this in an interview with ZTN, a Zimpapers Group television network on Tuesday, a day after President Emmerson Mnangagwa had launched the Government’s new five year economic development blueprint, the National Development Strategy (NDS1), which runs from 2021 to 2025.

The Treasury chief was responding to a question on whether the Government will adopt a different approach in its remuneration of civil servants, to ensure it gives its workers a living wage, under the new economic frameowrk, given that under the TSP, priority seemed to be inclined towards ensuring budget surpluses.

In fact, the Treasury chief has previously said that he expects the proportion of public employment costs to fall to about 42 percent of budget by year end and to keep trending towards deemed sustainable levels of around 30 percent of total revenues, to create provision for investment in developmental projects.

Essentially, what this means is that the proportion of employment costs in particular and any recurrent expenditure in general, in order to be sustainable, should tally or only mismatch with the Government’s revenue inflows slightly to leave some space for other key programmes.

Notably, the finance minister is on record saying, and more recently in his 2021 pre-budget strategy paper last month, that the Government wage bill had risen from 48 percent of total revenues in 2009, to a peak of about 78,3 percent in 2017, before receding to around 61 percent in 2018.

Clarifying the issue of wages this week, Minister Ncube said the Government was currently the best payer among employers in the country, doing better than the majority of private sector players with its lowest paid workers, among them the office orderly, now on a monthly salary of about $14 000.

But importantly, Minister Ncube said that surpluses were not the priority, but only a positive consequence of its significant efforts aimed at ensuring that the Government lives within its means and that it does not run unsustainable budget deficits that create problems in the future.

“We will not maintain budget surpluses; in fact it was never our target. Our target is to eliminate huge budget deficits or running small budget deficits. So, we will be running small budget deficits. 

“And besides… if you run large budget deficits because of wages or whatever the reason is, how are you going to finance it? Where are you going to borrow from if you have got arrears clearance?

“In terms of local borrowings, in the presence of high inflation, which is what we have now, of course it will drop, which will be excellent, but you do not want to over borrow domestically either because you have to pay very high interest rates, that citizens have to pay up in future in the form of higher taxes,” he said.

The Treasury chief stressed that when you are going through this kind of transition for now, it was more prudent for the Government to maintain small budget deficits and this results in a surplus, the better.

Against this backdrop, Minister Ncube said the State was the highest payer, challenging anyone who disputes the fact to present the evidence. The minister said he had all the information from across all sectors about how the private sector and other employers are rewarding workers.

“The lowest paid civil servant right now is on about $14 000 Zimbabwe dollars. A teacher right now will be earning close to $19 000 Zimbabwe dollars. And the lowest paid civil servant is actually an office orderly. We are actually way ahead of the private sector in general,” he said.

During the period of the short term transitional stabilization plan, the Government has managed to keep the budget almost balanced while current account deficits turned into surpluses.

Zimbabwe’s fiscal deficit, as a percentage of gross domestic product (GDP), also declined from minus 10,5 percent in 2017 to a surplus in 2019 and with an almost balanced budget in 2020.

The budget surplus resources, the finance minister said, have been used to cover obligations arising from emergencies such as natural disasters and unforeseen pandemics such as Covid-19, social protection and development of key infrastructure like roads, bridges and dams.

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