Government spending too high

After two years of making unfulfilled promises most people are closely watching to see if the government will this time make tangible efforts to reduce its spending when Finance Minister, Bernard Chidzero, announces his budget on July 30.

According to the authoritative First Merchant Bank’s Quarterly Guide to the Economy the government’s failure to make effective efforts to improve its performance has eroded the confidence of the private sector. Many companies which had raised funds either for investment or new projects now simply deposit their money with banks and other deposit receiving institutions.

This situation, the guide says, is unhealthy but is likely to persist as long as high rates of inflation continue and other conditions remain uncorrected.

The guide cites the example of the civil service which Chidzero indicated would be trimmed in his 1990 budget speech. The size of the civil service increased from 62 035 in 1980 to 181 402 in 1990, but instead of going down as promised it increased by a further 10 000 to 191 479 in 1991.

It must, however, be taken into account that the bulk of the civil servants are now teachers most of whom were not classified as civil servants in 1980 as most teachers fell under what was termed the United Teaching Service.

According to the guide the government spent more than $100 billion in the past 10 years, at current prices. The government has therefore been spending the equivalent of more than 50 percent of the country’s gross domestic product, a proportion that is about twice as high as the figure normally considered prudent for any economy that hopes for economic development and growth.

The guide says now that the government is under pressure to reduce the size of the civil service and the uniformed services, it has become conscious of the lack of employment growth in the private sector and is therefore resisting the necessary retrenchments.

It says that even if the government starts now, the long overdue reduction in government spending will take time to translate into the savings and returns needed.

Another worrying thing is the uncompromising attitude of civil servants towards business people. The guide says authorities should act as facilitators rather than barriers to those who are trying to create wealth.

It says business inconsistencies have occurred, as they inevitably must in a period of transition, but too often they are defended and deliberately entrenched by public servants when the business sector identifies problems.

Every unresolved complaint is having its effect on business efficiency and returns, and from there it inevitably impacts upon confidence, tax revenues to government and employment growth, the guide says.

(59 VIEWS)