Harare – Zimbabwe’s government continue to struggle with containing its expenditure within its budget levels and only a month into the 2019 financial year , targets have already been missed.
According to a monthly treasury bulletin for February 2019, expenditure for the month came in at $521.3 million which is 3% ahead of budget.
Government had set a February expenditure target of $505.7 million which it however surpassed due to the cost of living adjustment offered to the civil service.
Civil servants were mounting an unrest amid spiking average prices and exchange rate. Late in January a cushioning allowance was advanced and debited for February thus resulting in the overrun.
Despite the budget overrun, overall expenditure remained under control as revenues collected in the month surpassed both targets and the net expenditure levels.
Revenue collected amounted to $606.8 million which was 31% ahead of budget and 16.4% ahead of expenditure. The revenue outperformance since November 2018, has been driven by a widening tax base as well as deepening through steeper tax levels.
In October 2018, government introduced the 2% Intermediated money transfer tax which has had a significant impact on revenue growth.
A weakening exchange rate has also stimulated adverse price movements in the economy which have helped increase tax revenue through VAT among others.
Although government has sought to drive home the fact that it has been spending within its means, the outlook looks not as rosy.
Fiscus discipline will continue to be difficult to maintain going forward against spiking inflation levels now closing in on 100%.
The higher prices mainly tapping from the exchange rate disparities, in a “dollarised”market, makes it difficult for government to maintain budgeted spend levels.
The February gesture of cushioning civil servants is already an indicator towards further stimulation in line with spiking cost of living and general price increases in the market.
Naturally an $8 billion budget in RTGS would not satisfy USD$8billion worth of similar budgetary demand.
The average market already shows a more than 100% increase in average prices to about 350% and government is compelled to respond through adjusting its own initial budget.
In March government approved a 29% civil service salary increase which from April onwards will reflect a big jump in expenditure this closing the surplus gap enjoyed between November 2018 and March 2019.
Furthermore as the marketing season begins for most crops, the 38.5% subsidy on maize and other crops will result in a huge jump in government’s expenditure.
At this point government is likely to be running a deficit from May onwards. This will be further compounded by the decline in average spend in the economy in line with low incomes and eroding value -Equity Axis News.