- Zimbabwe ran a budget deficit of ZWL21.3 billion
- This was largely due to compensation to employees and non-financial assets
- Budget deficit means the government is biting what it cannot swallow
Harare- Zimbabwe has incurred a ZWL21.3 billion budget deficit which was financed from accumulated reserves during the first three months to March 31 2023 according to the Treasury’s First Quarter Bulletin Report.
The report shows that preliminary expenditures during the period stood at ZWL1.1 trillion, representing 15.2% expenditure above the quarterly target of ZWL936 billion, largely due to expenditures on the compensation of employees.
A budget deficit means the government is biting what it can not chew as it wrestles to finance pending projects ahead of elections and cushion civil servants due to the rapid depreciation of the local currency.
Employees' compensation used ZWL324 billion, while non-financial and financial assets took ZWL244 billion. Grants to extra-budgetary units cost ZWL199.7 billion while operations stood at ZWL$198.6 billion.
“Compensation of employees in the form of wages in cash and kind, employer contributions to medical aid and pension schemes, as well as funeral expenses constituted 30.1% of total expenditure, the largest share of the first quarter expenditures,” read the report.
ZWL199.7 billion in grants to extra-budgetary units constituted 18.5% of total expenditure, largely on account of salaries and allowance reviews awarded to the institutions funded by the government.
“Of the total grants of ZWL199.7 billion, expenditure towards operational costs constituted ZWL129.5 billion, employment costs at ZWL53.9 billion, while the remaining ZWL16.2 billion were transfers to provincial councils and local authorities.
Zimbabwe has been running budget deficits for long, due to fiscal indiscipline and quasi-fiscal activities.
Due to the rapid depreciation of the local currency and the desire to fulfil the past election promises and cushion employees, particularly the security personnel who plays a key role in elections, the government resorted to glutting the Zimbabwe dollar in the market offsetting the laws of demand and supply.
This is causing inflationary pressures, leading to the desire to print more money to fill the budget deficit.
In March 2023 alone, government securities through treasury bills were valued at US$1.4 billion, equivalent to about 30% of the national budget and 50% of March 2023’s M1 (currency, demand deposits, liquid assets). Such a glut in the money supply will even cause a budget deficit for the second quarter.
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