Despite some progress towards fiscal consolidation, budget discipline remains a challenge, the World Bank has said.

In its recent country analysis, the bank observed that higher government spending during the first-half of 2022/23 financial year widened the fiscal deficit, exerting pressure on government’s fiscal consolidation plans announced in at the start of the fiscal year.

Gwengwe: We will reduce the fiscal deficit

Reads the analysis in part: “Through the first-half of the fiscal year, from April to September, the fiscal deficit totaled 4.3 percent of the gross domestic product [GDP], wider than the mid-year target of 3.5 percent of GDP.

“Revenue collection slightly underperformed the approved target, and together with higher recurrent spending resulted in an above-target fiscal deficit.”

The bank said while some of these spending overruns, especially for goods and services, have been caused by external factors, including recent increases in commodity prices, others are due to a continued lack of budget discipline.

“If the performance for the first-half is maintained, the fiscal deficit for 2022/23 financial may widen further to 8.6 percent of GDP,” said the bank.

During the first-half of the 2022/23 financial year, government exceeded spending targets in almost all expense categories with expenditures totaling 12.1 percent of GDP, higher than the mid-year target of 11.8 percent of GDP.

Overruns were reported in all expense categories, other than social benefits and other expenses.

These categories in particular were impacted by the high rates of inflation and increased global commodity prices.

Higher spending was also reported on interest expenses, which totaled 2.2 percent of GDP, missing its mid-year target by 1.7 percent of GDP.

In year under review, debt servicing is projected to take up more than a third of domestic revenue, increasing by 50 percent relative to the previous financial year.

In his 2022/23 Mid-Year Budget Statement, Finance and Economic Affairs Minister Sosten Gwengwe said that with the current level of fiscal deficit, projected at 7.1 percent of GDP, but beyond the internationally acceptable level of 3 percent of GDP, government will continue with implementation of fiscal consolidation measures

This, he said, is to enhance revenue collection and control expenditures.

He said: “This means that we will continue implementation of measures to reduce the fiscal deficit to manageable and sustainable levels.

“This, in turn, will curb accumulation of debt in the short to medium term.”

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