The case of Zimbabwe (2015 to 2018)
FEATURED PAPER
By Tasiyana Siavhundu
Gweru, Zimbabwe
ABSTRACT
Orthodox public finance literature recognizes the impact that size, growth and composition of government expenditure have to the overall accomplishment of governments’ developmental goals. In most developing nations, government expenditure remains a cause for concern as political administrators tend to disobey principles governing optimal government expenditure through their continued allocation of funds to cost centers of their interest. Employing a content analysis methodology, this study is a synoptic review of the size, growth and composition of Zimbabwean government expenditure from 2015 to 2018 as well as efforts done by the government to arrest related issues. Reform of State-Owned Enterprises, reducing the size of the executive as well as prioritizing health and education sectors are among recommendations that the paper proffers to the government of Zimbabwe as expenditure optimization endeavors.
Key Words: Budgeting, Capital Expenditure, Government Expenditure, Public Debt, Zimbabwe
- INTRODUCTION
Aigheyisi (2013) defines government expenditure as expenses incurred by the government for the maintenance of itself and provision of public goods, services and works needed to foster or promote economic growth and improve the welfare of people in the society. Government expenditure, at its broad taxonomy, is composed of capital and recurrent expenditures. With a ballooning public debt currently at record breaking levels, the need for efforts to reform and improve fiscal discipline in Zimbabwe cannot be overemphasized. Zimbabwe’s perennial budget deficits have been a cause for concern and it is also high time corrective measures be devised to at least reduce these deficits before the detriment becomes acute. Since independence in 1980, government expenditure for Zimbabwe has been gradually growing and its composition has been criticized by public economists to constitute exceedingly more than expected share of recurrent expenditure at the expense of capital expenditure for long term projects and programs. In 2016, public wages alone represented 87 percent of the central government revenue, and 40 percent of local government expenditures and over 20 percent of total expenditure for State Owned Enterprises (SOEs), leaving little for Operations and Maintenance (O&M) and capital investments (Zimbabwe Expenditure Review Vol. 1, World Bank 2017). Since 2015 and even before, the government of Zimbabwe has been committed to instituting austerity measures through developing and enacting various policy instruments aimed at reducing and optimizing government expenditure. However, most of these government expenditure corrective measures have not been effectively implemented as planed as fiscal indiscipline continues to suppress the economy.
- PROBLEM STATEMENT
Today, Zimbabwe has very little fiscal space to stimulate the economy amid slowing growth, despite the government’s high effectiveness in raising taxes and revenues (Zimbabwe Expenditure Review Vol. 1, World Bank 2017). International best practice thresholds for employment costs are 7% of GDP and about 30% of the total wage bill. Also, international best practice requires that 30% of the total revenue be allocated to capital expenditure. However, the major chunk of government expenditure in the modern day Zimbabwe constitute recurrent expenditure, with the wage bill alone galloping more than 85% of budgeted revenues. At the heart of the Zimbabwean economy’s fundamental economic challenges is an unsustainable budget deficit, whose financing through issuance of treasury bills and recourse to the overdraft with the Reserve Bank is untenable (2018 National Budget Statement for Zimbabwe).
It is against this background of detrimental fiscal imbalances that realignment measures have to be sought and implemented so that healthy is achieved in Zimbabwean government expenditure. If possible, the government expenditure level, growth and composition that maximize economic growth have to be determined and strategies devised to work towards achieving such standards. Despite adoption of a multi-currency system in 2009 aimed at bailing out the sinking economy, Zimbabwe has sustained budget deficits as shown in Figure 1 below.
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How to cite this paper: Siavhundu, T. (2020). Issues surrounding size, growth and composition of government expenditure: The case of Zimbabwe (2015 to 2018); PM World Journal, Vol. IX, Issue III, March. Available online at https://pmworldlibrary.net/wp-content/uploads/2020/03/pmwj91-Mar2020-Siavhundu-size-growth-composition-of-government-expenditure.pdf
About the Author
Tasiyana Siavhundu
Gweru, Zimbabwe
Tasiyana Siavhundu is a member of the Project Management Zimbabwe (PMZ) with vast qualifications and experience in Project Management, Economics, Taxation as well as Investments and Portfolio Management. He is a holder of a B.Sc. Honours Degree in Economics, Master of Commerce Degree in Economics, Post-Graduate Diploma in Project Management, Executive Certificate in Investments and Portfolio Management, Advanced Certificate in Taxation and many other qualifications.
Tasiyana has worked both in the private and public sectors in Zimbabwe. He is now employed as a Revenue Officer with the Zimbabwe Revenue Authority (ZIMRA). He is very passionate about research work and has interests in the fields of Economics (particularly Public Economics), Project Management and Taxation.
Tasiyana Siavhundu can be directly contacted by email address: tsiavhundu@gmail.com
