ZIMBABWE’S 2019 Consolidated Financial Statement (CFS), in which government expenditure skyrocketed to ZW$22,53 billion against a target of ZW$17,64 billion, shows that President Emmerson Mnangagwa’s administration is yet to do away with the costly habit of fiscal indiscipline.
Mnangagwa, a protégé of former president Robert Mugabe, was catapulted to power in 2017 through a military coup, leveraging on pledges to cut government’s ballooning expenditure and foster fiscal discipline.
For all his documented ruinous policies, Mugabe’s near four decade at the helm was characterised by unbridled spending, underscored by his numerous foreign jaunts abroad with a bloated delegation in tow, and his wife, Grace’s penchant for shopping. At the height of Mugabe’s disastrous rule, Grace was pilloried for her exquisite taste in pricey fashion accessories. She was nicknamed “Gucci Grace” and in some quarters she was referred to as “the first shopper.”
With Mugabe now gone, having succumbed to cancer in 2019 at Gleneagles hospital in Singapore, where he was hospitalised at the expense of taxpayers, Mnangagwa seems to have learnt nothing and forgotten everything. He appears bent on reincarnating his predecessor’s era of profligacy.
What sticks out, like a sore thumb going through the 2019 Consolidated Fiscal Statement, is Mnangagwa’s administration overshooting its budget by ZW$1 billion financing foreign jaunts, as well as servicing an unsustainable public service wage bill.
In desperate efforts to secure a bailout package to resuscitate the economy, Mnangagwa, since assuming office in 2017, has travelled extensively outside the country aboard a luxurious hired jet. The jet, a Boeing 767, which has been flown by Saudi royalty in the past and described by its owners Comlux as “one of the most amazing aircraft in the VIP shuttle market” costs US$30 000 to fly for an hour.
In 2019, Mnangagwa flew to Bulawayo from Harare aboard the chartered aircraft, drawing the ire of tax payers. The 2019 public financial statement shows that foreign travel expenses accounted for ZW$578,57 million against the $183,76 million budgeted for such trips.
Ironically, Mnangagwa, in principle, is rolling out an International Monetary Fund (IMF) Staff Monitored Programme (SMP) which underscores the need to rein in public spending, among other imperatives.
Predictably, the government has already struggled to meet some of the key benchmarks of the (SMP) with the IMF raising the red flag that Harare is far from addressing macro-economic fundamentals, seen as key towards setting the country’s fragile economy on a firm recovery and growth path.
Zimbabwe is gripped by a debilitating economic crisis, punctuated by a shambolic health system, acute power shortage, widespread company closures and currency volatility. Atlas Mara, a financial advisory entity projects inflation quickening to 1 000%, compounded by the coronavirus pandemic, which has rattled the global economy to its core. The crisis is aggravated by the country’s import cover which stands at a mere 15 days — a reflection of the desperate state of the economy. Comparatively, Botswana has 15 months’ import cover.
Economist Prosper Chitambara contends that judging by the highlights of the 2019 Consolidated Financial Statement, Mnangagwa’s administration was not deploying adequate resources in social investment.
“At face value, government has exercised fiscal discipline as part of austerity, but that has come at a huge cost in terms of gross under investment in critical sectors such as health, water, roads and energy,” he said.
“The surplus is also not sustainable under the backdrop of a weakening currency that has spawned macro-economic stability. Recurrent expenditure also continues to account for a disproportionate share of total expenditures at almost 60%, which affects the sustainability of the economy.”
Revealingly, government’s books of accounts show that in 2019, employment costs surged by 28% to ZW$6,08 billion against a budget of ZW$4,74 billion. Against the advice of IMF, Zimbabwe is yet to flush its public service wage bill of ghost workers, though government made the commitment of halving cumulative civil servants’ salaries by 70% in 2018.
According to the finance statement, rental and other service charges rose by 161,68% to ZW$961,46 million against a budget of ZW$367,27 million while institutional provisions charges rose by 62% to ZW$316 million from a budgeted ZW$195,06 million. Resultantly, cumulative expenditure increased by 28% to ZW$22,53 billion from an initial target of ZW$17,64 billion for 2019.
However, government recorded a surplus of ZW$437 million, attributable to a raft of austerity measures that Treasury has been implementing since 2017.
Economist Brains Muchemwa cautions that the surplus is only a smokescreen, blurring the spiking inflation and the currency volatility crisis.
He contends: “It is inconceivable how a country running a budget surplus would see inflation running above 500%, with the currency losing over 90% of its value.
“Without consolidating the activities of the Reserve Bank of Zimbabwe and all parastatals, government finances do not reflect the consolidated position. Just a glance at the behaviour of the exchange rate and inflation over the same period confirms the existence of huge deficits whose monetisation was responsible for upsetting the general pricing framework in the economy.”
Even during Mugabe’s time, the central bank, under the successive stewardship of Gideon Gono and John Mangudya was accused of financing quasi fiscal activities through the issuance of Treasury Bills beyond the stipulated thresholds.
Bindura university commerce lecturer Felix Chari said judging by the outlook of government’s books of accounts, Mnangagwa should rein in galloping expenditure.
“The Zimbabwe government has a queer prioritisation of in its expenditure and as a result will fail to stir the economy to prosperity and sustainable growth. Its public expenditure is dominated by unproductive recurrent expenditure instead of growth enabling capital expenditure,” he said.
“It is therefore recommended that that government prioritises on cutting fiscal expenditure on non-productive sectors such as moribund parastatals.” – The Zimbabwe Independent