GOVERNMENT has revised next year’s expenditure ceiling from $28 billion by over 30 percent in light of inflation and the need to grow the economy. This was said by Finance and Economic Development Minister Professor Mthuli Ncube in a report titled “2020 Pre-Budget Parliamentary Consultation Meetings; October 30 to November 4, 2019”.
According to the Pre-2020 Budget Strategy Paper, revenues are projected at $24,8 billion (11,8 percent of GDP) next year, while expenditures are estimated at $28,5 billion (13,6 percent of GDP).
But Prof Ncube said, “This year is unique due to the high inflationary environment, and hence I would like to announce that total expenditure ceiling is being revised upwards from $28 billion by a factor of above 30 percent.
“This should provide a window to finance some of the additional Budget requirements from line ministries over and above the ceilings already provided,” said Prof Ncube.
Economist Mr Persistence Gwanyanya told The Herald yesterday that the decision to revise the expenditure ceiling was indicative of Government’s desire to press ahead with boosting the economy.
“For me, the review means two things: one, that it is a continuation of the thrust to stimulate the economy and two, an admission that inflation will not be going away soon,” said Mr Gwanyanya.
“So the Minister of Finance is merely saying, ‘let’s not plan as if we don’t know there is inflation’. Our expenditure target was initially $28 billion, but the need to grow our economy means we need to budget for slightly more expenditures. This is in line with Prof Ncube’s indication that we are now moving away from austerity to economic growth.”
In the Pre-2020 Budget Strategy Paper, Prof Ncube projected the economy to grow by 4,6 percent next year, building on the success of the ongoing reform initiatives.
Economic growth is also premised on the following broader assumptions: improved rainfall season which should enhance agriculture production and electricity generation with trickle-down effects to all other sectors; recovery in aggregate demand; improved foreign currency availability and improved macro-fiscal stability and business confidence.
Prof Ncube told parliamentarians that he noted the “huge resource requirements” demanded by all ministries for next year.
The Ministry of Defence wants $25 billion, Health ($18 billion), Home Affairs ($32 billion), Agriculture ($14 billion), Local Government ($9 billion), Industry ($6 billion), Transport ($3 billion) and Labour ($5 billion).
The total required by the eight ministries is $112 billion, a sharp rise from this year’s $18 billion Budget. Prof Ncube said the capacity of the Budget to finance expenditures is dependent on the economy’s capacity to generate revenues.
“From our deliberations, you will agree with me that revenue generation capacity is still low due to a number of challenges.
“The Budget ceilings that have been given by Treasury are therefore derived from the anticipated resources, envelope from taxes and what we can borrow from the market without destabilising the economy. We also need to be mindful that unrestrained expenditures financed through unsustainable means are the major source of economic instability we are battling today,” he said.
Prof Ncube said resources are never enough as advanced economies are also unable to meet yearly requirements.
“What is critical is that we become more results-focused so that allocated resources are used efficiently and effectively, as well as matched with performance, in line with the principles of Results-Based Budgeting.
“Going forward, Budget planning and reporting will be assessed on the extent to which ministries, departments and agencies (MDAs) achieve planned outputs and outcomes with availed resources,” he said. – Herald