Zimbabwe Finance Minister Patrick Chinamasa’s $4.1 billion 2015 national budget presented Friday exposed a deep fiscal crisis gripping government amid shock revelations that government will spend 92% of revenues in recurrent expenditures, leaving a negligible 8% for capital projects and service delivery.
Chinamasa told parliament of the total expenditures of $4.1 billion, $3.7 billion will be spent on the recurrent expenditures such as labor, meaning an insignificant amount would remain for crucial development projects and service delivery in a country reeling from collapsed infrastructure and poor service delivery.
This effectively crowds out crucial capital projects, retarding critical development.
Expenditures
“Recurrent expenditures will continue to dominate overall expenditures accounting for 92% of total expenditures, leaving about 8% for capital development programs,” he said.
The current account balance is projected to deteriorate from a deficit of $3.351 billion in 2014 to a deficit of $3.431 billion in 2015, due to huge trade deficits, low transfers and incomes.
In his budget speech, largely betraying government’s continued lack of fiscal space as the country’s economic tailspin shows no sign of abating, Chinamasa delivered the expected gloomy news to the nation.
An inordinate chunk of around $3.3 billion will pay for employment costs, leaving the balance of only $798 million to cover operations, debt service and capital development programs.
This is despite evidence that total revenue collections for the 10 months to October 2014 amounted to $3 billion against a target of $3.27 billion and $3.1 billion realized over the same period in 2013.
“For the period to October 2014, employment costs amounted to $2.51 billion, accounting for 80% of total expenditures, excluding loan repayments.
This was against a target of $2.35 billion, giving an expenditure overrun of $154 million, which is catered for under the 2014 supplementary budget presented together with my 2014 Mid-Year Fiscal Policy Review Statement,” Chinamasa said.
Financial Disaster
Government had hoped to reduce the wage bill from 75% of the total budget in 2013 to between 55%-65% in 2014, but failed dismally as it is now surging towards 100% of revenues, which is an unmitigated financial disaster for government.
Although the Civil Service Commission was supposed to be undertaking a restructuring exercise which should have been completed in time to inform the 2015 budget process, Chinamasa was silent on that.
