Reduce govt expenditure, Chinamasa told

HARARE - Finance minister Patrick Chinamasa must drastically cut government expenditure — particularly the civil service wage bill — in his 2015 National Budget, renowned economist Tony Hawkins said.

The Treasury chief is expected to present the budget today on the back of shrinking revenue while government’s recurrent expenditure is gobbling nearly 80 percent of the finances.

Hawkins said Zimbabwe has a high public spending to gross domestic product ratio of 31 percent compared to a sub-Saharan average of 24 percent, leaving its economy with no fiscal space.

“In other words it is essential to cut spending since the gap cannot be closed by revenue measures,” he said.

He said although “government has promised to do this in the 2015 budget, but unless the minister (Chinamasa) is willing to curb the civil service wage and salary bill, which accounts for 75 percent to 80 percent of total revenue, he will have very little scope to honour the terms of the Staff Monitored Programme (SMP) he has agreed with the International Monetary Fund (IMF).”

Under SMP, IMF has advised government to audit the civil service, among other measures.

Hawkins, however, said it was impossible to predict the content of the 2015 budget given the contradictions between the figures in Chinamasa’s September fiscal policy review, which indicated a large (23 percent) increase in government spending, and the most recently published figures that showed spending falling short of budget.

“This contradiction will have to be clarified in the 2015 budget. In a slowing economy, there is very little fiscal space to raise additional revenue on a continuing basis, though Zimra is raising additional funds through collections of arrears and penalties,” said Hawkins adding ”however these are one-off measures that cannot be repeated”.

He said the recently imposed higher import duties were self-defeating because choking import demand, as intended, meant lower revenue for government.

Hawkins noted that “in this situation it is naive to believe that the country can borrow itself out of trouble or that foreign investors will suddenly “ride to the country’s rescue”.

John Robertson, also an economist, said government could not restore a steady and dependable revenue flow without changing the policies that did the damage.

“Unfortunately, it has made no attempt to restore or create conditions that could produce the revenue flows needed.

“Investment is needed to rebuild factories, build power stations, buy aircraft, replace locomotives and repair railway lines, but government has decided to impose indigenisation restrictions that are driving the scarce investment funds elsewhere,” he said.

He said the 2015 budget must get rid of all the “discouraging policies”.

“It should also state government’s intentions to eradicate corruption, make Zimbabwe easy to visit, especially for people crossing the borders by road, and by preventing distortions in the value of the US dollars in use in Zimbabwe,’ said Robertson.

In his budget, Chinamasa faces an uphill task to stimulate growth through tax incentives at a time when he has to also find ways to increase government revenue.

Also, funding the budget is a tall order as government continues to miss revenue targets.

Government failed to secure external support for its $4,2 billion 2014 budget.

It recorded a nearly $30 million budget deficit in the nine months to September while tax collector Zimbabwe Revenue Authority’s revenue collections in the third quarter amounted to $884,5 million, missing a $972,3 million target by nine percent.

Last year, Zimra collected a total $3,4 billion in tax receipts, six percent short of a $3,6 billion target.

 

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