Former US president Ronald Reagan once observed that government was like a big baby — an alimentary canal with a big appetite at one end and no sense of responsibility at the other.
BY NDAMU SANDU
In Zimbabwe, recent treasury statistics have painted a gloomy picture of a government spending more than it generated in 2016, raising questions on its promises to behave responsibly.
Expenditure in 2016 was $4,92 billion against revenues of $3.502 billion.
This gave a budget deficit of $1,4 billion. However, what was worrying on the high expenditure was that 80% of that ($3,95 billion) was recurrent expenditure, leaving little for capital projects.
The budget deficit meant that government had to borrow from the domestic market through the issuance of treasury bills.
Economist and former Economic Planning minister Tapiwa Mashakada told Standardbusiness in an interview last week that government was running a Ponzi scheme by spending more than it generated.
A Ponzi scheme is a fraudulent investment operation in which the operator, an individual or organisation, pays out returns to early investors from new capital paid into the scheme by new investors, rather than from profit earned through bonafide business sources.
“Government acts as if its pockets are deep yet it is insolvent. It’s like we are running a Ponzi scheme,” Mashakada said.
“It’s economic fiction where you borrow John to pay Peter. The market is awash with treasury bills where government is rolling them over.”
He said there were no chances that the deficit would be narrowed “until there is a new government which does not have an affinity to spend what it does not have”.
He said government was in a fix as it had failed to grow the economy at a time revenue that could be collected had diminished and “there is no budgetary support from anyone including the Chinese”.
Mashakada said government had mopped up money that would have been given for onward lending for productive purposes.
Economist Prosper Chitambara said government would not be able to reduce the budget deficit with the 2018 elections approaching.
“There tends to be pressure on the fiscus side ahead of elections. Government has to pay bonuses amounting to $180 million,” Chitambara said.
He said what was worrying was that government was borrowing domestically through the issuance of treasury bills.
“Government has been rolling them [bills] over, so apart from crowding out the private sector, it becomes a threat because it is affecting the quality of assets of banks,” Chitambara said.
In his 2017 national budget, Finance minister Patrick Chinamasa said increased recourse to the domestic financial system for financing of the budget deficit would become destabilising, as cash and cash equivalents available to government forced larger reliance on financing modalities that contributed to significant financial sector risks.
But Chitambara said fiscal pressures would remain in place until next year due to elections.
Zanu PF is known for coming up with populist policies to curry favour with the electorate ahead of polls.