Happiness Zengeni Business Editor
Government paid out $1,02 billion as salaries to civil servants in the six months to June, a figure making up 63 percent of total current expenditure.
According to the latest report from the Accountant-General’s office, Government reported a budget imbalance of $36,56 million after the revenue line performed below expectations.
Total revenue was at $1,73 billion against a target of $1,84 billion, a negative variance of $112,02 million. Total expenditure and net lending was at $1,77 billion against a budget of $1,84 billion.
Economists say Government is diverting its limited resources to salaries and bonuses at the expense of gross capital formation required to expand investment.
Economist Joseph Sagwati said: “When investment does not expand, the economy will have a weak and minuscule tax base which the Government relies on. This will force them to borrow to cover the deficit when civil servants salaries are due.”
Tax revenue was at $1,62 billion against a target of $1,73 billion while non-tax revenue was at $105,98 million.
The bulk of the non-tax revenue came from fees from department facilities and services at $61,95 million above the targeted $48,61 million. Licences and fines brought in $5,48 million revenue while judicial fines were at $3,78 million.
Market analyst Miss Fiona Chigwida said: “It’s a no brainer really, Government will get more money from fees and licences and ministries may have to eat what they kill. Already this system works with the police.”
Government is at present near its own kind of fiscal cliff. The tax base has shrunk to its lowest, with the bulk of the working population now in the informal sector.
Worse still, diamond revenue lost its “glitter” as more investment is required to mine deeper for the kimberlites.
“Very soon, Government agencies will be asked to collect as much as possible. Government can’t introduce huge austerity measures because they are a people oriented party and a cut on the civil service wage bill would go against its basic tenets even though its chewing two thirds of the $4 billion revenue,” said Miss Chigwida.
Of the expenditure, $107,9 million was for capital projects with $85,27 million going towards capital transfers, $4,77 million was spent on feasibility studies and $7,9 million on the acquisition of buildings. Interest on debt was at $17,84 million for both foreign and domestic.
However, to address these challenges, the Ministry of Finance presented a package of additional revenue and expenditure measures to Cabinet in early June 2014.
The package amounts to about $933 million (6,9 percent of GDP) and places a heavier weight on revenue measures, including $554 million (4,1 percent of GDP) from selective increases in customs duties, targeted tax compliance operations, non-tax revenues mobilised largely by redirecting surplus resources in several extra-budgetary funds, and from measures to address Customs revenue leakages.