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Zimbabwe: Govt Budget Off the Rails
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Financial Gazette (Harare)
16 May 2008
Posted to the web 16 May 2008
Dumisani Ndlela
Harare
ZIMBABWE'S treasury is reportedly in a quandary over ballooning costs triggered by runaway inflation, which has completely eroded the value of the 2008 national budget, The Financial Gazette can reveal.
The 2008 national budget amounted to $7.8 quadrillion, or 49 percent of an implied gross domestic product (GDP) of $16 quadrillion.
Sources indicated that much of the budget for the entire year had been spent, with the recently held harmonised elections gobbling up a significant chunk.
Government domestic debt recently spiralled out of control to reach an incredible $6.4 quadrillion on April 17, pushed up by mounting government spending.
Apparently, much of the expenditure pressure emanated from the financing of the harmonised elections held on March 29, which have accounted for huge amounts of unbudgeted money due to inflationary pressures and the absence of external financial support.
Former Finance Minister Samuel Mumbengegwi allocated $209 trillion for the 2008 elections, saying this would fund personnel costs, vehicle procurement and other election related costs.
Government debt stood at $21 trillion at the start of the year.
The government has entirely depended on domestic sources to finance its ever-increasing budget deficits, resulting in increased money printing.
Bilateral and multilateral financial institutions terminated balance of payments support to the country over alleged human rights violations by President Robert Mugabe's government, accused of rigging the 2002 presidential election to retain power.
There is a stand-off between the Zimbabwe government and the international community, led primarily by the United States and its allies, over the recent presidential election, whose results were only released about five weeks after the poll.
The Movement for Democratic Change alleges that its leader Morgan Tsvangirai won the election, but the ruling ZANU-PF says none of the candidate won the 50.1 percent majority needed to declare a winner under constitutional amendments made just before the poll.
There are increasing worries government might be unable to finance a presidential election run-off after none of the contesting presidential candidates garnered the threshold required by the constitution to secure victory.
Tsvangirai, who fled the country a week after the elections, has finally confirmed his participation in the run-off, and ZANU-PF has said its candidate President Mugabe is once again ready for battle.
There are fears that the government printing machine will likely be kept hot to fund the election, stoking increased money supply growth, the major contributor to the country's inflation currently topping 165 000 percent.
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Money supply has maintained an upward trend, with latest figures indicating that it jumped from 1 638.4 percent in January 2007 to 51 768.8 in November 2007.
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