PRESIDENT Robert Mugabe’s government has run up a cumulative budget deficit of more than $3 billion since 2014, funded through local borrowings which have fuelled inflation and compounded a foreign currency crisis, official figures show.
A budget strategy paper issued by Finance and Economic Development Minister Patrick Chinamasa last week, projects a $1,41 billion budget deficit this year, similar to the 2016 shortfall. In 2014 and 2015, the country recorded deficits of $186 million and $125 million, respectively.
A coalition government formed by Mugabe’s ZANU-PF and the opposition recorded budget surpluses for three of the four full years that the opposition controlled Treasury.
Analysts have blamed the country’s resurgent inflation on unrestrained government spending, which is mostly consumptive. Ballooning government expenditure, mainly wages funded through the issuance of Treasury bills to banks, has resulted in the depletion of off-shore foreign currency holdings through the importation of United States dollar cash to meet huge local demand for hard currency.
As at June 30, 2017, there were $2,5 billion worth of T-bills in issue, according to Treasury data.
In recent weeks, repeated warnings by the International Monetary Fund (IMF), central bank governor John Mangudya and Chinamasa, that uncontrolled government spending would unleash inflationary forces, materialised in the form of price increases and fears of shortages of basic goods.
Mugabe and his government have, however, blamed the economic turmoil on a contrived social media misinformation campaign meant to trigger their ouster.
The President repeated the charge, this time citing “cyber-attacks” during the high-level Zimbabwe-South Africa bi-national commission meeting with President Jacob Zuma on Tuesday.
“There was abuse, unlimited abuse of our cyber-technology by those who wanted to undermine our economy and I think together we should look at how we can protect our economies,” Mugabe said.
Chinamasa, who warned of the catastrophic consequences of widening deficits last year, says his 2018 budget, which projects $4 billion revenue up from $3,7 billion this year, will attempt to restore fiscal balance. The budget strategy paper also forecast three percent economic growth for 2018, from a projected 3,7 percent this year.
“Fundamental challenges facing the economy revolve around low productivity, domestic production levels across sectors, as well as market indiscipline, that way underpinning prevailing low liquidity and foreign exchange levels in the economy,” reads the strategy paper.
“Central to resolving these challenges is addressing the mis-match between national budget revenues and expenditures.”
Employment costs, including pension payments and transfers to grant-aided institutions, account for at least 90 percent of total government revenues and Mugabe has shot down Chinamasa’s plans to cut the wage bill at least three times in as many years.
An exasperated Chinamasa told Parliament last Thursday that he was getting frustrated by lack of support in tackling government expenditure, which he cited as one of the causes of upheavals in the economy.
“The problem that we know is the fiscal deficit and this is not a matter that should be a responsibility of a Minister of Finance and Economic Development alone; it is our collective responsibility, here at Parliament,” Chinamasa said.
“However, what assistance, what cooperation do I get? None! It cannot be resolved by the Minister of Finance alone; it has to be a collective responsibility. We have said it out here, we are spending 90 percent of revenue on wages, we have nothing on operations, PSIP (public sector investment programme) infrastructure, and we have nothing. How do we hope to get out of our current situation? Those are the problems and these also trigger some of the instability in the market.”
In his July mid-term fiscal policy statement, Chinamasa skirted the budget deficit, which stood at just over $183 million at the end of the first quarter. Treasury has not published its bulletin for the second quarter.
However, central bank statistics show that cumulative government expenditure between January and May 2017 amounted to $2,020 billion, which is $360,5 million above the target. Government’s wage bill overshot targeted expenditure by 17 percent, reaching $1,45 billion in the first five months of the year.
Government has also overshot its foreign travel budget, with Mugabe accounting for the biggest chunk of the expenditure.
Foreign travel expenses, which stood at $53,27 million at the end of December 2016, against a budget of $23 million, showed no sign of slowing down this year. In January alone, government spent nearly $5 million on foreign travel, against a budgeted $1,1 million.