Budget deficit widens in Q1

Finance Minister Patrick Chinamasa has forecast an ambitious $700 million deficit forecast

GOVERNMENT spending outpaced revenue by $225 million in the first quarter of 2018, up from $183 million last year, latest official data shows.

The data shows government overshot its travel budget, while committing more to capital expenditure than was initially planned.

The 2018 budget allocated $2.2 million on domestic travel, but government spent $13.8 million in a frenetic quarter which saw President Emmerson Mnangagwa and his top officials traversed the country to bed in the new administration.

The Treasury report also discloses the cost Mnangagwa’s international re-engagement effort, which had him on a frenetic travel schedule in the early months of his term. According to the figures, Government spent $9.2 million on foreign travel, which is $2.4 million above budget.

The Mnangagwa administration says it is targeting a $700 million budget deficit this year, after overspending by $2.5 billion in 2017, the equivalent of 14 percent of gross domestic product.  

Second quarter spending is also expected to have significantly exceeded revenue, after government was forced to raise wages following industrial action by public health workers. Government also awarded the broader civil service a 17 percent pay hike.

REVENUE

Cumulative government revenue flows during the first quarter of 2018 amounted to $1.16 billion, 8 percent above the target of US$1.1 billion as all tax heads, save for individual income tax and royalties, exceeded targets.

The revenue performance was 25 percent up on total collections in the corresponding period of 2017, thanks in large part to inflation.

The economy remained heavily dependent on Value Added Taxes (VAT) and taxes on income and profits, which contributed 35 percent and 34 percent to total revenue, respectively, during the first quarter of 2018.

The 2018 national budget projected revenues of $5.07 billion in 2018 premised on US$4.3 billion tax revenue, $237,2 million non-tax revenue, $434 million retained revenue and $100 million grants.

EXPENDITURE

Government spent $ 1.385 billion in the first quarter, against a target of $1.112 billion.

Of this spending, $1.102 billion (79.6 percent) was on recurrent expenditure while $283 million (20.44 percent) was on capital expenditure.

Employment costs constituted 60.4 percent of total expenditure (versus 66.5 percent in 2017Q1) and 75.9 percent of recurrent expenditure (79.6 percent in 2017Q1).

“The declining share of employment costs to total expenditures gives a ray of hope on Treasury intentions to reduce the crowding out effect of employment expenditure on other non-wage capital and social spending, key for stimulating growth and reducing poverty,” the Parliament Budget Office, an independent organ which exercises oversight on government spending, said in its analysis of the first quarter outturn.

In the first quarter of 2017, total expenditure was $1.052 billion, with $879 million or 83.5 percent being recurrent expenditure and $166 million or 15.8 percent capital expenditure.

The 2018 budget allocated $3.3 billion for the government wage bill, with $2.6 billion being set aside for the public service wage bill, inclusive of grant aided institutions.

 

 

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