Govt expenditure overruns persist

via Govt expenditure overruns persist | The Herald 16 July 2014 by Happiness Zengeni

Government expenditure overruns persisted in May although at a much slower pace than recorded in April, latest data from Treasury shows.

According to the state of the economy report for May, total revenue collections for the month under review amounted to $275,8 million against a target of 308,9 million, giving a negative variance of $33,4 million.

Cumulatively to May, total revenue collections amounted to $1,36 billion against a target of $1,48 billion, giving a negative variance of $121,8 million.

The Ministry of Finance notes in the report that poor performance was, however, witnessed in customs, other indirect taxes as well as non-tax revenue.
This was after the country recorded an almost 24 percent decline in imports in the five months to May.
Excise, personal income tax and VAT were the major contributors to growth in revenue during the month.

Total expenditures for the month of April amounted to $278,2 million against a target of $308,9 million. This brings cumulative expenditure to $1,4 billion against a target of $1,48 billion.

Economists have warned that with employment costs (including grant-aided institutions and pensions) accounting for 74 percent of projected total revenue, the expenditure mix is clearly unsustainable.

Recently, the International Monetary Fund’s mission to Zimbabwe urged  the adoption of a medium-term fiscal strategy aimed at rebalancing expenditure away from employment costs in order to increase capital investment and spending on social programmes.

Out of the total expenditure, only 1,9 percent was spent on capital projects.
The ministry notes that after reviews and backdating of salaries in April the monthly budget deficit was reduced to $2,4 million in May from $71,9 million.

The balance was financed through domestic borrowing. However, overall Government borrowing in the five month period decreased 2,7 percent to $476,9 million from $490,2 million.

Government says it has identified revenue measures and expenditure cuts, and plans to roll over a fraction of domestic maturities falling due. If fully implemented, these measures could result in a budget surplus of approximately 1½ percent of GDP in 2014.

Economists, however, say the mix of measures proposed by Government seems to rely excessively on spending cuts. These cuts may further depress prospects for the economy in the short and medium term (as they include drastic reductions in capital spending), and do not appear sustainable.