Lower than expected revenue collections in the first quarter point to the possibility of a budget deficit of $150 million by year-end unless economic activity rebounds in the second half of the year.
Revenue collections to date have remained below the $230 million target per month to meet the $2,7 billion budget.
Total revenue collections for the first quarter amounted to $655,6 million.
Major contributors to revenue were valued added tax $199,4 million (30%), pay as you earn 134,1% (20%), customs duty $77,9 (12%), corporate tax $60,2 million (9%) and non-tax revenue $63,6 million (10%).
Speaking at a media briefing in Harare on Tuesday, Finance minister Tendai Biti said the country’s economy has in the last two years rebounded in the second half of the year.
“There has been an under-performance on the revenues that is why we have made a strong case for transparency in the way diamond revenues have been handled.
“The Diamond Revenue Act has to be made law as a matter of urgency.
“Our biggest problem is that due to the civil servants salary hike that occurred in January we now have a shortfall of $150 million that is if we collect our envisaged $2,7 billion. I don’t know where we will get that money. The deficit is felt in the services that are not paid for due to the crowding out effect.
“The good news is that the first quarter of every year is always bad. Our economy has a second half turnaround and I am hoping that it will be the same this year.
“During the first quarter of the year the country’s import bill stood at $4 billion compared to exports at $2,7 billion.
“Zimbabwe, a net importer particularly from South Africa, is bound to be affected by exchange rate volatility between the US dollar and the rand. Since January this year to date, the South African rand has been strengthening. This is obviously putting pressure on domestic prices since more US Dollar would be required to import the same commodities.”
He said the first-quarter performance indicated a high recurrent expenditure accounting for 93,7% while capital expenditure accounted for only 3,9%.
“The budget situation that prevailed during the first quarter of the year calls for the government to realign recurrent and capital expenditures to the 2011 National Budget proposed ratio of 70:30 between recurrent and capital expenditure,” said Biti.
“However, this entails massive cutting of recurrent expenditure by 23,7% which is very painful but has to be done if the economy is to achieve sustainable growth from now going forward.”
He said diversifying and improving export earnings as well as improved remittances in the face of very low capital inflows would bail the country from the current challenges.
Biti said the mining sector had remained “the goose that is laying the golden egg, largely driven by increase in gold prices”.
The country this year expects to produce 13 tonnes of gold.
He said this was still a long way from the hay days of 60 tonnes a year.
“Recurrent expenditure at 93% is a disaster. This is having a crowding out effect on our capacity to fund other services.”