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Govt clocks up huge budget deficit

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GOVERNMENT incurred a budget deficit of ZW$32.1 billion (about US$286 million) during the third quarter of last year, driven by current expenditure which accounted for 61% of total spending.

DUMISANI NYONI

Current expenditure comprises ongoing day-to-day expenses, like the cost of running schools, hospitals and other essential services.

According to the Reserve Bank of Zimbabwe’s quarterly economic review report for the third quarter of 2021, government revenue collections amounted to ZW$119.17 billion, with tax revenue accounting for 92.9% of total revenue, while non-tax revenue contributed the remaining 7.1%.

Tax on income and profits amounted to ZW$40.3 billion and accounted for 33.8% of total revenue. Value-added tax collections accounted for 25.1%; tax on financial and capital transactions (10.4%); excise duty (9.7%); non-tax revenue (7.1%); custom duties (5.9%); taxes on gross revenue (5.0%); taxes on specific services (2.7%) and other indirect taxes (0.2%).

The report shows that total government spending amounted to ZW$151.27 billion in the third quarter of 2021, comprising ZW$92.06 billion in current expenditure and ZW$59.21 billion capital expenditure.

Capital expenditure increased by 15% to ZW$59.206 million, from ZW$51.467 million in the second quarter, largely reflecting expenditure on infrastructure projects being undertaken by the government, according to the report.

“Current expenditures accounted for 61% of total government expenditure. Compensation of employees dominated current expenditures, at 48% of the total, with use of goods and services, social benefits, subsidies, interest on debt accounting for 52%,” the report reads in part.

The fiscal developments in the period under review culminated in a budget deficit of ZW$32.1 billion, up from the cumulative budget deficit of ZW$16.7 billion, recorded in the second quarter of 2021.

The country has been struggling to cut its deficit despite promises to do so, mainly due to high government spending on public-sector salaries.

The ZW$32.1 billion deficit is more than double the government’s projected year-end deficit of ZW$14 billion (or 0.5% of gross domestic product).

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