ED foreign trips bleed Treasury
Foreign jaunts by President Emmerson Mnangagwa and his administration officials plus rising public service salaries continue to weigh heavily on Treasury, which saw it overspend by over $1 billion, government financials for 2019 have shown.
Government registered a surplus of $437 million against a target of $1,58 billion due to higher than budgeted increases in employment costs, procurement and service costs and a high foreign travel bill, which overshot its allocation by over 200%, the 2019 Consolidated Financial Statements show.
Mnangagwa had numerous trips last year using a hired private jet, which sometimes would fly for over seven hours from Dubai to carry him for a 40-minute local trip.
Employment costs shot up by 28% to $6,08 billion from a targeted $4,74 billion.
This was attributed to increases in the civil services wage bill, Premier Service Medical Aid Society costs and grant aided institutions wage bill.
Last year, Treasury abandoned the use of multiple currencies when it reintroduced the Zimbabwe dollar.
However, due to lack of adequate foreign currency, commodity or market confidence the new currency has significantly devalued, driving prices through the roof and forcing government to spend and borrow more to meet these new costs.
The International Monetary Fund (IMF) cautioned the Zimbabwean government against boosting wages for State workers after the introduction of a new currency pushed up inflation and reduced spending power.
The IMF said it was crucial that public wage growth be aligned with economic growth and government revenue.
Apart from wages, goods and services went up 36% to $3,93 billion from an initial target of $2,9 billion.
A 216,03% spike in foreign travel expenses to $578,59 million from a budgeted $183,76 million, rental and other service charges (161,68% to $961,46 million; target $367,27 million) and institutional provisions (62% to $316 million; target $195,06 million). As a result, total expenditure rose 28% to $22,53 billion from an initial target of $17,64 billion for 2019.
According to the IMF, from September 2019, the Staff-Monitored Programme (SMP) for Zimbabwe that was approved by IMF management in May 2019 went off track owing to the large quasi-fiscal operations by the central bank.
During the IMF SMP 2019 Article IV Consultations, the fund noted that pervasive deficits remain in control of fiscal expenditure.
“Directors called for non-essential spending cuts, including decisive reforms to agricultural support programmes, to allow for social spending needs. They underscored the importance of public financial management and enhanced domestic revenue mobilisation efforts,” the Article IV Consultation document read.
“Directors stressed that eliminating deficit monetisation would not only be crucial for fiscal sustainability, but it would also serve as a precondition for the stabilisation of hyperinflation and the preservation of the external value of the currency.”
For 2020, IMF stated that while the government’s total spending allocated in the budget is $63,6 billion, latest projections of revenue and financing fall short of what is needed to support the full spending envelope of $69,6 billion.
As a result, the IMF estimates a fiscal financing gap of about $14,9 billion in 2020, about 3,8% of the gross domestic product, which could force government to again miss its targets for this year.
This is mainly driven by hyperinflation, low production, electricity and water shortages, shrinking foreign currency base, heavy fuel subsidies and a ballooning debt.
“While discussions were inconclusive, staff urged the authorities to contain spending on inefficient subsidies and transfers while bolstering more effective social transfers (eg, harmonised cash transfer), and making a concerted effort to prioritise capital expenditure in case financing does not materialise,” the IMF said.
“Staff also encouraged the authorities to undertake co-ordinated outreach to external and domestic stakeholders to maximise the chances for financing the deficit.” NewsDay