FINANCE and Economic Development Minister Professor Mthuli Ncube’s austerity measures are paying dividends with respect to Government finances, once in shambles due to successive budget deficits, with the latest report on the state of public accounts showing that nearly half a billion RTGS dollars surplus was achieved in the first quarter of this year.
A national budget surplus means a Government’s finances are in a healthy state and the extra financial resources can be used to pay off debts (which reduces interest payable), can help reduce taxation and help finance new and existing public programmes (social security or medical care).
In Treasury Bulletin number 31, 2019 released last week, the minister said liberalisation of the exchange rate and tightening of fiscal and monetary policy regimes, often blamed for much of the chaos currently characterising the pricing madness, were containing inflationary pressures.
Annual inflation, however, hit the 75,8 percent mark in April, the highest post dollarisation in 2009, as exchange rate premiums of foreign currency bought on the black market, took their toll on domestic prices.
Minister Mthuli started implementing the Transitional Stabilisation Programme (TSP) at the beginning of this year with particular focus on fiscal, monetary and structural reforms to stabilise macroeconomic fundamentals.
Despite the still extremely volatile environment, positive effects of the stabilisation programme, scheduled to run until 2020, have started to trickle in and in no better form than improved state of public finances.
“On a positive note, there is marked improved performance on central Government finances, with revenues at $1,9 billion, outperforming target of $1,8 billion throughout the first quarter of 2019 to give overall positive variance of $146 million,” the bulletin says.
“On the other hand, expenditures were contained at $1,5 billion against a target of $1,7 billion to give savings of $218 million. This, as a result, gave a budget surplus of $443 million,” the report adds.
Major expenditures were Government employment costs at $1,015 billion, operations and maintenance at $185,6 million, interest at $93,3 million and capital projects, which consumed $174,8 million.
The positive performance in the first quarter was built on strong revenue performance of $1,9 billion, 8,2 ahead of first quarter budget and 64 percent better than the same period last year when $1,2 billion was realised.
The Treasury Bulletin said the improved revenue performances were due to strong tax revenue collections by Zimbabwe Revenue Authority (ZIMRA) after strengthening of the taxman’s collection system, plugging of tax loopholes as well as the review excise duty levied on fuel, which generated $146 million.
“The performance also benefited from the Intermediated Money Transfer Tax (IMTT), which generated average monthly revenue of $95 million against target of $50 million,” the Treasury Bulletin says.
On the back of improved management of Government finances, Treasury said neither Treasury Bills nor the Reserve Bank of Zimbabwe overdraft facilities were used to fund the budget with only $180 million TBs having been issue to settle obligations from maturing TBs.
TBs issued to finance the budget prior to the onset of austerity measures were largely responsible for the huge domestic debt that Central Government ran up post the inclusive Government period, which now stands after the first five months of 2019 from $9,6 billion in December 2018.
Treasury said the decrease in the stock of debt was on account of debt repayments with minimal TB issuances of $28 million for cash flow management purposes.
“There were no new TBs issued during the period under review in line with the 2019 National Budget pronouncement. Government set itself to stop issuing Treasury Bills and stay with budget,” the Treasury bulletin says.