FOREIGN jaunts by President Emmerson Mnangagwa and his
administration officials plus rising public service salaries continue to weigh
heavily on Treasury, which saw it overspend by over $1 billion, government
financials for 2019 have shown.
Government registered a surplus of $437 million against a
target of $1,58 billion due to higher than budgeted increases in employment
costs, procurement and service costs and a high foreign travel bill, which
overshot its allocation by over 200%, the 2019 Consolidated Financial
Statements show.
Mnangagwa had numerous trips last year using a hired
private jet, which sometimes would fly for over seven hours from Dubai to carry
him for a 40-minute local trip.
Employment costs shot up by 28% to $6,08 billion from a
targeted $4,74 billion.
This was attributed to increases in the civil services wage
bill, Premier Service Medical Aid Society costs and grant aided institutions
wage bill.
Last year, Treasury abandoned the use of multiple
currencies when it reintroduced the Zimbabwe dollar.
However, due to lack of adequate foreign currency,
commodity or market confidence the new currency has significantly devalued,
driving prices through the roof and forcing government to spend and borrow more
to meet these new costs.
The International Monetary Fund (IMF) cautioned the
Zimbabwean government against boosting wages for State workers after the
introduction of a new currency pushed up inflation and reduced spending power.
The IMF said it was crucial that public wage growth be
aligned with economic growth and government revenue.
Apart from wages, goods and services went up 36% to $3,93
billion from an initial target of $2,9 billion.
A 216,03% spike in foreign travel expenses to $578,59
million from a budgeted $183,76 million, rental and other service charges
(161,68% to $961,46 million; target $367,27 million) and institutional
provisions (62% to $316 million; target $195,06 million). As a result, total
expenditure rose 28% to $22,53 billion from an initial target of $17,64 billion
for 2019.
According to the IMF, from September 2019, the
Staff-Monitored Programme (SMP) for Zimbabwe that was approved by IMF
management in May 2019 went off track owing to the large quasi-fiscal
operations by the central bank.
During the IMF SMP 2019 Article IV Consultations, the fund
noted that pervasive deficits remain in control of fiscal expenditure.
“Directors called for non-essential spending cuts,
including decisive reforms to agricultural support programmes, to allow for
social spending needs. They underscored the importance of public financial
management and enhanced domestic revenue mobilisation efforts,” the Article IV
Consultation document read.
“Directors stressed that eliminating deficit monetisation
would not only be crucial for fiscal sustainability, but it would also serve as
a precondition for the stabilisation of hyperinflation and the preservation of
the external value of the currency.”
For 2020, IMF stated that while the government’s total
spending allocated in the budget is $63,6 billion, latest projections of
revenue and financing fall short of what is needed to support the full spending
envelope of $69,6 billion.
As a result, the IMF estimates a fiscal financing gap of
about $14,9 billion in 2020, about 3,8% of the gross domestic product, which
could force government to again miss its targets for this year.
This is mainly driven by hyperinflation, low production,
electricity and water shortages, shrinking foreign currency base, heavy fuel
subsidies and a ballooning debt.
“While discussions were inconclusive, staff urged the
authorities to contain spending on inefficient subsidies and transfers while
bolstering more effective social transfers (eg, harmonised cash transfer), and
making a concerted effort to prioritise capital expenditure in case financing
does not materialise,” the IMF said.
“Staff also encouraged the authorities to undertake
co-ordinated outreach to external and domestic stakeholders to maximise the
chances for financing the deficit.” Newsday
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