September 30, 2022

Employment costs to gobble up Finance Minister Ncube’s ZW$968.3 billion budget, economic growth revised down to 4.6%

By Alois Vinga

Finance Minister Mthuli Ncube announced on Thursday that 53% of his Z$968.3 billion supplementary budget to cover the second half of this year will be eaten up by government employment costs.

The plan has also failed civil servants, who will continue to face pressure to see anything above Z$50,000 a month taxed.

According to Ncube, by the end of the year, a total of Z$832.7 billion was spent on employment costs alone, constituting more than half of the budget, followed by the use of goods and services. at 18% and social benefits at 7%.

Presenting it to parliament, Ncube said the supplementary budget was inevitable due to rising inflationary pressures.

“The revision is necessary to allow spending agencies to meet the increasing costs of implementing the programs and projects originally budgeted that will ensure the achievement of the 2022 targets.

“Revenue collected through the end of the year is now projected at ZWL$1.7 trillion, while expenditure is now estimated at ZWL1.9 trillion. This goes against the approved budget of ZWL$968.3 billion, resulting in additional expenditure of ZWL$929 billion,” he said.

Capital projects are expected to eat up a meager 19% of the budget.

These developments come at a time when the government is facing immense pressure that poses a high risk of crippling civil servants’ strikes over pay rise demands.

Ncube’s supplementary budget has led it to widen tax exemption thresholds on local currency earnings to just Z$50,000 a month, a figure likely to keep workers in the heavily taxed margins.

“The proposed supplementary budget presents a financing gap of ZWL$157.5 billion (1.5% of GDP) which will be filled through the issuance of treasury bills and domestic loans.

“Issues include the pending US$100 million US dollar-denominated bond to be issued through the Victoria Falls Securities Exchange (VFEX) for infrastructure development. This will also be complemented by a drawing rights drawdown. (SDR) equivalent to ZWL 60.6 billion,” he said.

He however said that the economic performance during the first half of 2022 reaffirmed the positive growth trajectory as forecast in the 2022 national budget.

The Treasury boss also revised economic growth to 4.6% due to internal and external inflationary pressures.

“The downward revision is mainly the result of the lower production of the 2021/22 agricultural season, aggravated by the continued depreciation of the local currency and the rise in inflation. The impact of geopolitical developments also weighs on the potential growth in the economy,” said Ncube.