Government was lagging behind its tax revenue target by 6,3 percent as of August 31 while total expenditure was within target although a deficit of $19,58 million was reported in the period. Cumulative tax revenue in the eight-month period was at $2,204 billion against a target of $2,35 billion. Mostly weighing down the amount is underperformance of the customs duty, corporate tax and Value Added Tax heads.
Figures availed to The Herald Business by the Accountant-General’s Department show that customs duties were $197,63 million against a target of $272,22 million following the introduction of restrictive measures meant to support local industry.
In the period, Government paid out $1,386 billion in employment costs against a target of $1,296 billion, a variance of 7 percent. Total expenditure including retained grants was at $2,42 billion below the budgeted $2,51 billion.
The tax base continues to thin in light of the crippling economic challenges. In the first half, Zimra missed its revenue target as poor economic conditions affected inflows to the fiscus. The performance of the revenue head is expected to remain depressed until industrial capacity utilisation improves from the current 36 percent.
According to the International Monetary Fund Regional Economic Outlook for Sub-Sahara Africa, Government revenue to the gross domestic product is projected at 29,2 percent this year but would decline marginally to 29,1 percent.
Government expenditure to GDP is estimated at 30,9 percent this year and 28,5 percent next year. Generally, the need to rebuild depleted Government deposits, amortise domestic and selected external debt, and modestly increase international reserves all raise the Government’s gross financing requirements in 2014.
In June this year, the IMF executive board said there was need to mobilise revenue, including from the diamond sector.
The directors also stressed the importance of rebalancing the expenditure mix away from employment costs in order to free up resources for development. It said strengthening public financial management is also crucial to prevent accumulation of new arrears.
To address these challenges, the Ministry of Finance in the Mid-term Policy Review presented a package of additional revenue and expenditure. Government instituted a host of new taxes aimed at mainly bolstering its unbudgeted recurrent expenses, which it estimated at $951,3 million.
The revenue measures are worth about 2,8 percent of GDP and include selective increases in customs duties, targeted tax compliance operations, non-tax revenues (surplus resources generated by several extra-budgetary funds), as well as additional customs revenues from a determined effort to address identified leakages.
Expenditure measures are worth 1,8 percent of GDP and include re-prioritising non-personnel, non-interest current expenditure, while ring-fencing high-value social spending.
This, according to analysts, will certainly further depress consumption, while no stern measures were put in place to reduce recurrent expenditures.
Furthermore, although a series of measures were put in place to curtail imports, no concrete measures were put in place to promote exports.
Meanwhile, the IMF has maintained Zimbabwe’s economic growth forecast at 3,1 percent this year and 3,2 percent next year. According to statistics released in The Regional Economic Outlook on Sub-Saharan Africa report, growth in the Sub Saharan region is expected to remain strong, at about 5 percent in 2014 and 5,75 percent in 2015.
Zimbabwe’s gross national savings as a percentage GDP are expected to remain in negative territory but improve slightly from -14,4 percent to -13,4 percent in 2015 while the country’s overall fiscal balance will improve from -1,7 percent to 0,6 percent.
Total investments to the country will decline in 2015 to 12,9 percent of GDP from 13,7 percent this year. Broad money is expected to go up from 29,2 percent this year to 29,7 percent next year while broad money growth will move up from 3,3 percent to 6,4 percent.