eBusiness Weekly
Publicised, sections in the Public Finance and Management Act is section 28, which requires the Treasury to publish consolidated financial reports in the Government Gazette within 30 days of the end of the month.
This “Consolidated Statement of Financial Performance of the Consolidated Revenue Fund” to give it its full title make fascinating reading and, in effect, move the Government from being one of the worst somewhat secretive to being one of the most open entities in Zimbabwe. Citizens, and anyone else who cares to buy a copy, can now get more frequent and up-to-date information of the Government than a shareholder in a company listed on the Zimbabwe Stock Exchange.
Admittedly the Treasury is not at the 30 days yet. The statements for May and June came out last week, but they are proper accounts, formally signed off by the Secretary for Finance and Economic Development, who happens to be the Paymaster General as well, and the Accountant General and come as a 16-paged document that includes the month in question plus a summary of the year-to-date.
But even a glance at these statements reveals a lot, and despite the problems this year, shows that the Government is doing better than it brags.
For a start, it is not just running a primary budget surplus, that is meeting its recurrent expenditure out of income, which is almost taxes, but is running an absolute budget surplus, at least when a batch of months is taken into account.
In May there was a deficit of $58,75 million, although the target deficit was $1,04 billion, but in the previous four months, the bank accounts had been built up so there was surplus of $27,32 million for the first five months. That deficit was the result of the first civil service and pension pay rise of the year. While income taxes were running way above target, which will surprise no one, VAT and other indirect taxes were largely below target, almost certainly because April was the first month of the intense lockdown.
But in June every revenue source soared. Income taxes rose to $5,19 billion and indirect taxes to $5,59 billion, with $2,02 billion that coming from VAT. Recurrent expenditure was higher, but at only $5,02 billion with the payroll only taking $1,71 billion mind you but grants taking almost as much with $1,7 billion. So the Government had a primary surplus of just over $6 billion. Through in the non financial assets spending, almost $1 billion, and the $280 million for financial assets and you have a surplus in total of $4,8 billion. The target deficit was $1,01 billion but with all that liquid cash the word “deficit” was hardly uttered.
The Government has been boasting that only 50 percent of its revenue goes on salaries and staff compensation. In fact in May this was more than 37 percent and in June it was less than 16 percent.
So now we know why there was enough money for the second round of increases in September. But even then someone was being very, very careful.
The care, to spend nothing unless the cash is in the bank, explains why it took so long for the adjustment of the tax brackets in August. It rather looks as though Minister Mthuli Ncube not only wanted to see several months of rising income tax revenues as the inflation-driven pay awards came into effect in the private sector, but wanted to make sure his indirect consumption taxes were rising to take the strain before he even thought of an adjustment.
That same thinking must be part of the timing of his civil service pay awards. We do not have the July and August accounts, but it is a safe bet that he waited until the revenue for the first month of his new income tax regime was in the bank, and his VAT has risen again, before he started spending. There is an interesting point that VAT might well be carrying most of the salary bill. It certainly did in June.
But those worried about the September pay awards should perhaps not worry. By the look of things Minister Ncube can still have change from just his indirect taxes, long before he has to commit his income taxes.
There are other minor interesting points. Beer taxes are well below target, but taxes on wines and spirits are up. Whether this was just a delay in a Delta payment, or whether in the lockdown people were turning to the harder stuff, would be interesting. But the switch to opaque beers in most supermarkets outside the really north of the northern suburbs might well explain the beer tax drop while the inflation might explain the rise in hard-liquor taxes, with most buyers being people who think in US dollars are so do not get hysterical over a $200 bottle of something that is probably diluted ethanol diverted from the fuel supply or $2 000 for something with an imported label in a glass bottle.
Smokers incidentally chip in now with $1,8 million a month, so non-smokers should not get too emotional when they see someone light up. In any case tobacco taxes are way below target and it is obvious that a cigarette at present prices is a luxury, not a cheap prop, for most smokers.
Covid-19 produced some interesting changes in spending patterns. The Government’s foreign ravel bill plummeted, but its communication bill soared. In June it was spending just over $51 million on foreign travel, about a third of the target, but was spending $135 million on communications, about four times the target. The combined total was below the combined target, so the switch to virtual has been a significant cost saver.
Those curious as to why there has been some heavy reworking of subsidies can find the answer in the June accounts, when Minister Ncube spent almost $500 million on subsidies, nearly half the total for the first six months but only $90 million on social payments. Even with higher social payments and putting more people on the lists, there is an obvious major saving.
As economists continuously remind everyone when it comes to subsidies, they are incredibly inefficient as well as distorting markets.
We never got to the stage we saw in the 1980s when farmers were buying subsidised roller meal to feed to the pigs because it was so much cheaper than unsubsidised pig food, but only because this time around subsidised roller meal was so hard to find unless you were diverting it to the black market.
That particular problem, incidentally, is another reason why a switch from subsidy to social payment is so useful. The same cost control probably explains the four-fold increase in Zupco bus fares in the last few months.
There are lots of other little such details, but the main impression given by the accounts is not so much that the Government is keeping good accounts. It has always had good accounts, or reasonably good accounts. What is new is that these are now obviously been read very carefully by those making decisions.
Tying together the accounts, the policy statements and the announcements of increased spending on some matter, or reduced spending in say subsidies, a very interesting inference leaps out.
It is clear that we have now reached the point where the Government spends nothing, and does not even commit itself to spending something, until the money has actually landed in the bank account. There does not appear to be guesswork built on estimates, but rather spending related to actual income, what the tax collectors actually extract.
And that surplus is probably being put to good effect. The domestic interest bill is now about half the target, suggesting rather strongly that the Treasury is retiring short-term debt rather than rolling it over faster than it planned. Again a positive move as we sort out our inherited decades of indiscipline.
Those worried about the maintenance of fiscal discipline should perhaps get their copies of these monthly accounts and keep a good eye on them. Certainly in the first six months, even with Covid-19 and inflation, Minister Mthuli Ncube ran a total surplus of around $5 billion, which suggests a degree of discipline unheard of in Zimbabwe.
In other words we seem to be healthier than even the politicians tell us, and perhaps we are now in the strange position where politicians are being vague about the finances not so much to hide indiscipline but to discourage those who see money in the bank and want to spend it today, regardless of whether enough comes in tomorrow.
