Treasury has scored progress in trimming monthly fiscal budget deficit as part of Government’s economic reform agenda with September 2018 deficit reduced to $19 million against a target of $99 million, Finance and Economic Development Minister, Professor Mthuli Ncube reported.
Fiscal consolidation, governance reforms and stimulating production and exports is at the heart of the country’s Transitional Stabilisation Programme (2018 to 2020) that draws policy thrust from Vision 2030, which seeks to transform Zimbabwe into an upper middle-income economy.
Treasury has noted with concern rising money supply in Zimbabwe, occasioned by a bloated public expenditure and budget deficit financing, coupled with foreign currency shortages. These have been blamed for the surge in prevailing inflationary pressures on the market.
Minister Ncube told legislators, economists and Cabinet ministers who attended last week’s 2019 pre-budget conference in Bulawayo, that the austerity measures being implemented under the new dispensation had started bearing fruit on the fiscal budget front.
For the first time in the month of September 2018, he said the country’s fiscal budget was balanced. Between January and September Zimbabwe’s overall expenditure was $6,3 billion against the planned expenditure of $4,1 billion, according to Treasury.
“So, we have overshot our expenditure during this period. This resulted in an expenditure overrun of $2,2 billion, that’s what it is, and it has been driven by some unbudgeted for capital, net lending, some employment costs that were not foreseen and interest on debt.
“This overrun of expenditure was funded through the issuance of Treasury Bills averaging 10 percent interest per annum. That interest alone is a cost, which has also crept into the $2,2 billion. So, you see the ballooning in the issuance of TBs, but I must say that the picture is beginning to look better,” said Minister Ncube.
“This obviously means that the budget deficit for January to September is $2,5 billion against target of $715,4 million, and it was Treasury Bill financed but also through the overdraft to the Central Bank, which currently is about $2,2 billion or so.”
He noted that on month by month since the beginning of the year, the country had experienced ballooning fiscal budget deficit, which grew significantly in March and had to be stopped in September.
“Basically, since March it (budget deficit) has just been running away but look at September, when we stopped the (Treasury Bill) printing machine and closed the tap, we almost reached the break-even position and I expect this trend to continue to narrow by the year-end,” said the minister.
“I am comfortable with the sharp narrowing of the budget deficit. So you can see September deficit was $19 million compared to the target of $99 million. So we over performed. Deficit was almost zero. This will contribute to stabilising the currency and in containing inflation.”
Minister Ncube also said the country was still grappling with current account deficit on the external sector, which remains under pressure although now showing signs of improvement on the back of measures being implemented by Government to boost exports and moderate impact of imports.
“We have what we call a typical twin deficit problem — fiscal deficit and external deficit — where demand for imports is much higher than exports, which puts pressure on demand for foreign currency. We are just not exporting enough and we are consuming too much imports,” said Minister Ncube.
“We have to consider having those importing luxury goods paying duty in the currency used to buy those goods.”
The minister, however, said revenue collection has performed well since beginning of the year with Zimra being able to surpass monthly targets. Value added tax (VAT) tops the ladder of revenue contributors followed by excise duty, income tax and corporate income tax.