eBusiness Weekly
Tawanda Musarurwa
Government posted a budget deficit of $538,6 million for the month of September 2019 on the back of inflationary pressures and drought relief efforts.
During the period under review, the Government was compelled to increase civil service wages to protect its workers from the effect of rising inflation on the prices of basic goods.
Speculative pricing by retail players and the impact of illegal foreign currency trading have driven inflationary pressures, which has had an adverse impact on disposable incomes.
According to the Government’s Consolidated Statement of Financial Performance for the month ended September 30, 2019, total recurrent expenditure grew by 15 percent at $1,72 billion from the initially budgeted amount of $1,5 billion.
Recurrent expenditure for the period was worsened by a 70 percent jump in civil services wages, which increased from the initially budgeted figure of $450,7 million to $766,9 million in September.
A concomitant increase in pensions pay-outs also contributed to the growth in recurrent expenditure. Pensions grew from the initial budgeted figure of $94,2 million to $165,6 million in the month under review.
To alleviate the impact of last season’s drought, Government committed to a programme of providing food aid to communities across the country and the efforts gobbled up $1,11 billion, up 120 percent from the initially set figure of $506,2 million.
Notwithstanding a 10 percent gain in the State’s incomes during the period, moving from $2,73 billion to $2,99 billion, the deficit emerged on the back of a 36 percent jump in expenditures.
Total expenditure for the period stood at $3,53 billion from the budgeted figure of $2,61 billion.
Last year, Government set a target of reducing its budget deficit to 5 percent of Gross Domestic Product (GDP) this year from 12 percent in 2018, so the results for the month of September 2019 will not be pleasing.
At the beginning of September 2019, a visiting International Monetary Fund (IMF) delegation did warn of these possible risks to effective execution of the budget strategy.
“Economic difficulties have continued throughout 2019, exacerbated by severe weather shocks. GDP growth in 2019 is expected to be steeply negative as the effects of drought on agricultural production and electricity generation, impact of Cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth.
“Social conditions have deteriorated sharply, with more than half of Zimbabwe’s population (8,5 million people) estimated by the United Nations (UN) to be food insecure in 2019/2020…Risks to budget execution are high as demands for further public sector wage increases,” said head of delegation Gene Leon at the time.
But it is however important to note that for the nine month to the end of September 2019, the Government posted an overall surplus.
The Government’s ‘austerity measures’, which have now come to an end were underpinned by the need to effectively manage State finances to at least manage the fiscal deficit to sustainable levels; both through cutting unnecessary spending and increasing revenue.
Government, through the Reserve Bank of Zimbabwe, has been issuing Treasury Bills to close the funding gap.
