eBusiness Weekly
HARARE – The 2019 national budget, which will be presented in November, will contain measures to strengthen revenue collection and minimising government expenditure to reduce the ballooning budget deficit which stood at $1.12 billion by June, the Ministry of Finance and Economic Development has said.
According to a pre-budget strategy paper obtained by New Ziana, a drastic reduction of the budget deficit to 5.2 percent of GDP in 2019 is targeted.
Subsequent reductions to 3.5 percent in 2020 and 3.1 percent of GDP by
2021 would be pursued in compliance with the SADC threshold of below 3 percent of GDP.
“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,” read the paper.
“In that regard, the 2019 Budget will focus on improving revenue collection and containing current expenditures while increasing social service spending and developmental budget. Social services spending and developmental budget spending are peculiar in that they reduce poverty, improve the standards of living of all citizens and foster economic development.”
According to the paper, revenue collections for the first half of the year amounted to $2.51 billion against a target of $2.21 billion, resulting in a positive variance of $0.30 billion.
But, total government expenditure during the same period stood at $3.72 billion against targeted expenditure of $2.60 billion, implying an expenditure over-run of $ 1.12 billion.
The half year budget deficit emanated mainly from pension disbursements, upward review of health sector specific allowances which led to an additional monthly bill of $12 million, as well as filling of
2 282 nursing posts in the health sector.
Budget expenditure also shot up due to the channeling of funds towards agriculture input support schemes, grain procurement, roads and dam construction as well as capitalisation of public institutions.
During the period, the deficit was financed through issuance of treasury bills and through a Central Bank overdraft facility.
Hence, the strategy paper proposes a strict adherence to some legal borrowing requirements including debt ceiling as a ratio of GDP.
For example, section 11(1) of the Reserve Bank Act [Chapter 22:15] requires that Central Bank lending to the State at any time shall not exceed 20 percent of previous year’s government revenues, but the stipulated threshold has been surpassed.
The legal requirements, if adhered to, are integral in improving fiscal management.
“In the absence of sustained fiscal discipline and strong expenditure containment policy measures, the pointers are of a worsening position over the period 2018-2020,” it said. – New Ziana