HARARE – President Robert Mugabe’s government must take to heart the International Monetary Fund (IMF)’s warning to cut its excessive spending as a way of managing the current cash crisis.
In its article IV for Zimbabwe, the Bretton Woods institution said excessive government spending, if continued, could exacerbate the cash scarcity, further jeopardise the health of the external and financial sectors, and, ultimately, fuel inflation.
Spending pressures stem from high employment costs, government transfers to support specific economic sectors, and elevated discretionary expenditure. The IMF also added that reinforcing the government’s efforts to curtail non-priority spending was also pressing.
This comes as Zimbabwe, which has been facing debilitating cash shortages for over a year, has been recording waning revenue collections with the country missing its 2016 collection target by four percent.
Despite this, the country’s public sector wage bill consumed about 97 percent of the country’s revenue collections in 2016. The country’s inflation has also been firming following a two-year deflationary period, with market watchers warning inflation is going to continue rising as the year progresses.
It is also important that government, which recorded a budget deficit of $1,1 billion in 2016 as its expenditure — at $4,3 billion — exceeded revenue of $3,1 billion, urgently reviews its wage bill and allowances.
Reducing the wage bill could involve reviewing allowances and benefits and evaluating the size of the civil service with a view to eliminating nonessential posts.
There is lot of duty duplication and ghost workers in government departments as contained in the latest Civil Service Audit which revealed that a total of 12 392 people were found to be rendering service to government yet not appearing on the payroll, causing an unbudgeted expenditure of $81 147 840 per annum.
This is all coming on the backdrop of Zimbabwe’s economic and political climate having deteriorated significantly while unemployment has increased‚ interest rates have spiked‚ and business and consumer confidence is low.
The result of this is that the country’s gross domestic product growth has slowed. Slow growth implies lower government revenue‚ higher fiscal deficits‚ weak investment spending‚ sluggish infrastructure roll-out‚ and rising social and political tensions‚ all of which significantly affect people’s living conditions.
To avoid economic stagnation later in the year, government will have to demonstrate a commitment to decrease spending.
The government desperately needs their income to increase. In order to do this, the government will have to focus on measures which will grow the country‚ reduce the unemployment rate and increase the tax base.