World Bank country economist Stella Ilieva has said the fiscal surplus reported by Finance Minister Professor Mthuli Ncube is not superficial.
She made the remarks at a virtual discussion hosted by the Zimbabwe Economic Society this week amid scepticism over the availability of the alleged surplus when the country is failing to meet some of its financial obligations.
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Ilieva, however, warned the government against taking comfort in the proclaimed fiscal surplus as it does not include future liabilities such as the country’s debt overhang.
According to the Treasury, in the first quarter of the year, a budget surplus of ZW$17.1 billion (US$201.1 million) was recorded as a result of revenue increase and a decrease in expenses.
However, the government uses cash-based accounting that only records receipts and payments thus ignoring any future liabilities such as the huge debt of US$16.36 billion or social needs. Ilieva said:
Firstly, on the fiscal surplus and I want to link it to the question of wages and public servants. I wouldn’t say the fiscal surplus is superficial because we saw that the unsustainable situation which was before where 70% or 80% of revenues were spent on public servant wages has been changed, amended, of course, thanks to the inflation, so it’s not superficial.
But this surplus, we need to have in mind that this is a surplus on a cash basis and Marko (World Bank country economist Marko Kwaramba) said that there are arrears to suppliers, there are arrears on social programmes. I also mention the BEAM (Basic Education Assistance Module) programme, cash transfers have not been paid or were paid much below what was planned.
She added that even in the health expenditure, not all the allocated spending was actually implemented.
Finance minister Mthuli Ncube has used the cash-based surpluses to tout fiscal consolidation, yet, the nature of cash-based accounting does not accurately cover all fiscal affairs.
More: The Independent