Austerity measures put in place since Finance and Economic Development Minister, Professor Mthuli Ncube assumed office have so far yielded positive fiscal results as official figures attest but run-away inflation is seemingly weighing down on major gains.
A raft of frugal reforms in public spending have seen monthly budget deficits transform into surpluses starting last year December to date.
According to latest Treasury Quarterly Bulletin, the government recorded RTGS $ 102 million surplus in January, RTGS $ 85.5 million in February and RTGS $ 200 million for the month of March, on account of prudent spending and improved revenue receipts.
“These measures have been complemented by a concerted effort to widen our revenue base. One prominent example, the two percent tax on electronic transactions, was hotly disputed when it was announced, but its impact has been significant. US$166 million was raised in the last two months of 2018, and almost US$100 million was raised in January alone. We project that over US$600 million will be raised during 2019,” the Finance Minister said in a statement today.
The surpluses have so far been channeled towards social protection programs starting with aid towards Cyclone Idai, the Basic Education Assistance Module (BEAM) receiving $8 million in the first three months of the year, civil servants salary increment ($ 400 million), Health Care received $ 1.05 million, targeted cash transfers $ 2 million, food deficit mitigation $ 1.63 million and $ 1.3 million to the elderly amongst notable segments.
However, rising inflation has eroded much of the gains the government has recorded as exchange rate spirals continue to put pressure on prices on the market.
Despite surpluses, the government continues to struggle to raise foreign currency reserves required to meet essential import demands such as fuel and electricity.
Analysts have applauded the government strides in cutting public spending but however remain wary of continued depletion of value of the RTGS currency.
“What the Minister has managed to do is to contain government spending to sustainable levels while broadening its revenue space. These are key fundamentals that are essential in the economy but the challenge has been failure to contain inflation,” Economic analyst Kipson Gundani told 263Chat Business.
“Dwelling on surpluses might not be the best way to look at how the country goes forward because they mean nothing if these surpluses in RTGS are being eroded on a daily basis. Making the interbank market work efficiently, in a manner that brings confidence on the market will stabilize the exchange rate and ultimately proper planning occurs in a stable pricing environment,” he added.
The interbank market has faced multi-faceted challenges including lack of confidence in the bourse, limited seller of USD currency and relatively low exchange rates deterring sellers.