Harare – The 2019 National Budget first and foremost, targets strengthening fiscal responsibility and management of Government expenditures in order to create an appropriate environment for increased Budget financing of development programmes that enable and enhance the economy’s overall productive activities, says Finance and Economic Development Minister, Prof Mthuli Ncube in his 2019 pre-budget strategy paper.
The 2018 National Budget emphasised on macro and financial risks emanating from no-compliance with some borrowing legal requirements namely, Debt Ceiling as a ratio of GDP; and Central Bank lending to the State.
Ncube said it further introduced two more fiscal anchors meant to contain the budget deficit and hence unsustainable borrowing, as well as strengthening budgetary support for development projects.
“These four fiscal anchors are integral in improving fiscal management for the good of the economy.
“The 2019 BSP, therefore, reiterates commitment to the following fiscal anchors and targets, and further proposes penalties for noncompliance with PFM Act fiscal management provisions.”
Prof Ncube pointed out that his 2019 Budget Strategy Paper proposes drastic measures to reduce the Budget deficit.
“The 2019 Budget Strategy Paper proposes drastic reduction of the Budget deficit to 5.2 percent of GDP in 2019, and subsequently to 3.5 percent in 2020 and 3.1 percent of GDP by 2021, making us comply with the SADC threshold of below 3 percent of GDP.
“International best practice and SADC adopted thresholds for sustainable public indebtedness is pegged at 60% of GDP. However, Section 11(2) of the Public Debt Management Act [Chapter 22:21] requires that total outstanding Public and Publicly Guaranteed Debt as a ratio of GDP should not exceed 70 percent at the end of any fiscal year.”
The Treasury boss said by end of 2018, it is estimated that the statutory limit of 70 percent is likely to be exceeded in view of the current borrowing trends from the domestic market and this underpins the urgency for containing the fiscal deficit.
As part of the fiscal consolidation anchors, Cabinet directed that Government prudently manages expenditures in a manner that allows for the creation of adequate fiscal space for the re-orientation of National Budget resources towards development programmes.
“Re-orientation of expenditures from consumptive spending to developmental priorities will be key under the 2019 Budget. In 2017, the capital Budget allocation was at 8 percent of GDP and is expected to reach 11 percent of GDP in 2018.
“This is far below best practice thresholds of close to 25 percent of GDP and over 30 percent of total Budget, required for promoting sustainable development. Moreover, a bigger part of the capital Budget was directed towards non infrastructure programmes such as agriculture financing and Public Enterprises capitalisation,” he said adding that containment of consumptive expenditures is, therefore, critical for freeing resources towards capital investments, as well as achieving desirable deficit targets.
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