3-Falling revenue and a huge budget deficit
Zimbabwe’s budget is entirely funded by taxes as international lenders stay away but the collapse of its manufacturing industry, the worst drought in a quarter century, low mineral commodity prices that have hit exports and lack of foreign investment have seen revenue collection falling below target.
The Zimbabwe Revenue Authority said taxes for the January to June period amounted to $1.65 billion, below the projected $1.75 billion. Compared to the same period last year, collections were down nine percent.
The economy continues “to ride on choppy waters,” noted the ZIMRA chair, Willia Bonyongwe.
Chinamasa last November put the expected budget deficit for 2016 at $150 million – compared to $400 million last year — which was to be financed from local borrowings but that figure is likely to be higher due to poor revenue collection performance.
Government has become more reliant on Treasury Bills to fund recurrent expenditure, but last month, Old Mutual Securities, a unit of the Zimbabwe Stock Exchange-listed financial services giant, Old Mutual Limited warned that these have become risky given the tight fiscal space.
Reserve Bank officials privately estimate the current amount of local debt in the form of TBs at over $4 billion, most of which is attributable to the Finance Ministry through its Public Debt Management Office. The $4 billion gap is equivalent to the size of the entire 2016 national budget.
The central bank’s own schedule showed the growth of its TB securities held by commercial banks from $325.7 million in January last year to $1.126 billion in February this year.
Building societies held $65.6 million from $51.8 million over the same period.
In the first quarter, government projected domestic loan repayments of $678.6 million and a budget deficit of $150 million, result in a financing gap of $828.6 million for the year. How will Chinamasa plug the gap?
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