Cumulative budget deficit of more than $3 billion since 2014
Zimbabwe government has run up a cumulative budget deficit of more than $3 billion since 2014, funded through local borrowings which have fuelled inflation and compounded a foreign currency crisis, official figures show. Analysts have blamed the country’s resurgent inflation on unrestrained government spending, which is mostly consumptive. Ballooning government expenditure, mainly wages funded through the issuance of Treasury bills to banks, has resulted in the depletion of off-shore foreign currency holdings through the importation of United States dollar cash to meet huge local demand for hard currency. As at June 30, 2017, there were $2,5 billion worth of T-bills in issue, according to Treasury data.
In recent weeks, repeated warnings by the International Monetary Fund , central bank governor John Mangudya and Chinamasa, that uncontrolled government spending would unleash inflationary forces, materialised in the form of price increases and fears of shortages of basic goods. Mugabe and his government have, however, blamed the economic turmoil on a contrived social media misinformation campaign meant to trigger their ouster. Chinamasa, who warned of the catastrophic consequences of widening deficits last year, says his 2018 budget, which projects $4 billion revenue up from $3,7 billion this year, will attempt to restore fiscal balance. We have said it out here, we are spending 90 percent of revenue on wages, we have nothing on operations, PSIP infrastructure, and we have nothing.
Treasury has not published its bulletin for the second quarter. Government’s wage bill overshot targeted expenditure by 17 percent, reaching $1,45 billion in the first five months of the year. Government has also overshot its foreign travel budget, with Mugabe accounting for the biggest chunk of the expenditure. Foreign travel expenses, which stood at $53,27 million at the end of December 2016, against a budget of $23 million, showed no sign of slowing down this year.