Zim govt must reduce spending

Source: Zim govt must reduce spending – DailyNews Live

18 May 2017

HARARE – President Robert Mugabe’s government must take to heart the
International Monetary Fund (IMF)’s warning to cut its excessive spending
as a way of managing the current cash crisis.

In its article IV for Zimbabwe, the Bretton Woods institution said
excessive government spending, if continued, could exacerbate the cash
scarcity, further jeopardise the health of the external and financial
sectors, and, ultimately, fuel inflation.

Spending pressures stem from high employment costs, government transfers
to support specific economic sectors, and elevated discretionary
expenditure. The IMF also added that reinforcing the government’s efforts
to curtail non-priority spending was also pressing.

This comes as Zimbabwe, which has been facing debilitating cash shortages
for over a year, has been recording waning revenue collections with the
country missing its 2016 collection target by four percent.

Despite this, the country’s public sector wage bill consumed about 97
percent of the country’s revenue collections in 2016. The country’s
inflation has also been firming following a two-year deflationary period,
with market watchers warning inflation is going to continue rising as the
year progresses.

It is also important that government, which recorded a budget deficit of
$1,1 billion in 2016 as its expenditure – at $4,3 billion – exceeded
revenue of $3,1 billion, urgently reviews its wage bill and allowances.

Reducing the wage bill could involve reviewing allowances and benefits and
evaluating the size of the civil service with a view to eliminating
nonessential posts.

There is lot of duty duplication and ghost workers in government
departments as contained in the latest Civil Service Audit which revealed
that a total of 12 392 people were found to be rendering service to
government yet not appearing on the payroll, causing an unbudgeted
expenditure of $81 147 840 per annum.

This is all coming on the backdrop of Zimbabwe’s economic and political
climate having deteriorated significantly while unemployment has
increased’ interest rates have spiked’ and business and consumer
confidence is low.

The result of this is that the country’s gross domestic product growth has
slowed. Slow growth implies lower government revenue’ higher fiscal
deficits’ weak investment spending’ sluggish infrastructure roll-out’ and
rising social and political tensions’ all of which significantly affect
people’s living conditions.

To avoid economic stagnation later in the year, government will have to
demonstrate a commitment to decrease spending.

The government desperately needs their income to increase. In order to do
this, the government will have to focus on measures which will grow the
country’ reduce the unemployment rate and increase the tax base.