Government reported a budget deficit of $28,4 million in the nine months to September, adding more weight to arguments that the Minister of Finance should adopt cash budgeting when he presents his statement on Thursday. According to the latest budgetary data from the Accountant-General’s Department, Treasury reported cumulative deficit including grants of $28,46 million, an amount which was above the budgeted deficit of $13,79 million.
Net Government revenue in the period amounted to $2,73 billion against expenditure and net lending of $2,758 billion. Employment costs which take up a bigger chunk of revenue, amounted to $1,54 billion, a figure which outstripped the budgeted $1,45 billion by $90,8 billion as the Government continues to add more numbers to its payroll.
In the period, interest on both foreign and domestic debt amounted to $34,35 million against the budgeted $15 million. Government revenue has for long underperformed and missed set targets mainly as a result of the difficult economic conditions affecting performance of companies.
Analysts say that faced with such a situation and serious structural deformities in the economy that will certainly not go away overnight, Treasury will need to spend only what is available in the coffers in order to avoid debt build-up.
“Failure to observe the basic rule of cash budgeting results in expenditure overruns that weigh on and put pressure on taxpayers; themselves already overtaxed and battling to make ends meet,” said Mr Jerome Negonde, a market analyst.
Fiscal discipline is critical in the face of growing calls, including from the International Monetary Fund, to live within budget, especially at a time when most of the spending is recurrent expenditure. According to the IMF Regional Economic Outlook for Sub-Sahara Africa, Government revenue to the gross domestic product is projected at 29,2 percent this year but will decline marginally to 29,1 percent next year. Expenditure to GDP is estimated at 30,9 percent this year and 28,5 percent next year.
Meanwhile, analysts have also called on Finance Minister Patrick Chinamasa’s upcoming budget to consider reducing withholding tax on investments to 5 percent from 15 percent so as to encourage savings; while also reducing taxes on low-income earning individuals in order to stimulate savings so as to deepen the role of the financial sector.
There are also calls for the operational guidelines for the tax-free savings instrument aimed at mobilising savings pronounced in the 2014 mid-year fiscal policy review need to be finalised and operationalised.