Budget deficit will get worse – Tendai Biti

via Budget deficit will get worse – DailyNews Live by Tendai Biti  3 NOVEMBER 2013

The 2014 budget is highly anticipated  for many reasons but none other so than that it is the first post-election budget of the new regime in town.

In an era marked by shallowness and the dearth of white papers or other policy debate, the budget becomes much more than a simple resource allocation mechanism or a fiscal planning  instrument.

It becomes as much a political statement of intent as well as an economic document.

As a political document it will go a long way to show the intentions and political direction of those in office.

Will they sober up and moderate, now that they are blessed with a comfortable majority, irrespective of its illegitimate paternity. Or will it be a continuation and reconnection with the pre-GNU politics of predation.

Put differently of the many faces of Zanu PF, which face will turn up, A Mr Jekyll or a Mr Hyde. But it is as an economic document that more will be disclosed by what is said and in this case probably more by what is not said. After all, the document is a very technical instrument  which must speak to the science of textbook economics.

So it will have to have a macroeconomic framework, with all the necessary projections. What will be the underlying presumptions of that framework.

It will have to have the always competently executed blue book, with the appropriations.

Speaking of the framework,  will it be any different from the framework in the Zanu PF blue print “Zim PEST.”

If it is not, are we back to the old era of the same government with documents that are at cross talk.

In this regard, it will be hard to come up with a set of underlies that will justify a growth of more than two percent for 2014.

For many, to what extent will the document be loyal to the Zanu PF manifesto and all the zany ideas that $14 billion can be raised from this economy, through Indigenisation and disposal of public assets.

The biggest challenge in formulating this budget will be resources. In simple terms, how to finance the same.

Resources have never been in abundance. We all know that, so the task is always that of managing a tiny envelope in an ocean of high demand and huge expectations.

But what compounds matters is that revenues have been dwindling, and Zimra, through no fault of their own, cannot meet the 2013 Budget demands. So Zanu PF has no choice but to do the obvious and spend what they have. They must eat humble pie. It is called “we eat what we kill”

The economy is too small for their ambitions and they cannot easily monetise that. In the short-term, they will resort to toxic debt from all angles  and dubious corners at usurious rates of interests.

These things will come to haunt the economy sooner rather than later.

The assumption that China or South Asia will provide resources is one that will be tested and its naivety proven.

For a party that genuinely believes money grows on trees, the concept  of “eating what you kill “ will be impossible to live with. It is therefore easily foreseeable that the Zimbabwean dollar has to be brought back, to allow monetisation of the humongous obligations and election promises made.

It is just a but  question of time.

Revenue collection is another issue that will haunt the regime. It is called the revenge of history.

During the GNU, Zanu PF created parallel structures of revenue collection, chief of these being diamond revenue of course.

But there were other massive funds that despite the clear provisions of the Public Finance Act  and the Constitution, retained their collections.

The most notorious being funds under the ministry of Home Affairs, the Police Fund, and the Registrar General.

It is going to be impossible to dismantle the  toxic deep founded structures of a parallel government. So the era of fiscal haemorrhage will continue.

But while the parallel structures of revenue collection will remain unabated, the parallel unaccounted  and  off budget toxic expenditure incurred nocturnally during the GNU will be loaded to the treasury.

The amounts could run into hundreds of millions.

With accrued arrears of over $300 million, and other unbudgeted for expenditure such as the $150m Zambia maize loan scheme and the recent debt accrued in respect of the $160 million government agriculture input scheme, it is Armageddon.

One has not even factored in the issue of the 2013 bonus.

A basic arithmetic model will show the unthinkable.

That as we head towards 2013,projected net revenues for 2014, are less than accrued arrears of 2013. Put simply, there is  huge budget deficit in excess of the 2014 income.

 

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