Tuesday 2019-07-16

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BROKE GOVT SUSPENDS CAPITAL PROJECTS

By Mbono Mdluli | 2018-06-15

Government is faced with a financial crisis.

As a result, Minister for Finance Martin Dlamini has come out to ask for solutions from MPs on the bad state of the economy in the country. Dlamini said this yesterday in the House of Assembly, where he stated that government’s cash flow was very negative.  He said government tried to reduce the budget deficit by 6.9 per cent in the budget for 2018/2019.

“Three main items in the budget which constitute salaries (E7.7 billion), transfers to government-subvented enterprises (E5.8 billion), and statutory expenditure including debt service (E2.3 billion) add up to E16 billion, which is total to the revenue available,” Dlamini said. He said the situation meant that the budget would already go unbalanced before a provision of capital expenditure and other critical goods and services such as rentals and drugs. The projected cash flow deficit by the end of the present financial year would be E7.1 billion. As at March 31, 2018, government arrears stood at E3.28 billion. He said if he were to assume full execution of the 2017/2018 and 2018/2019 budgets, projections would indicate exponential growth in the arrears stock. The cash balance at the end of the first quarter was expected to be negative and continue growing through the year, despite the receipt of SACU revenue at the start of each quarter.  In accordance with government’s public debt position and on consideration of the domestic debt issuance and maturities, it would be unlikely that treasury Bills and Bond issuance would improve the cash flow for government operations in the coming financial year. Dlamini further mentioned that government’s cash flow position had an enormous impact on the payment of government’s trading partners, including suppliers and contractors, as well as government’s overall ability to meet its priority expenditure obligations such as salaries, debt service, statutory payments and transfers. For the month of June alone, a total of E1.1 billion was required to settle priority expenditure that could not be postponed. Of this amount, E702 million was for June salaries (including payment of on-call allowances of E56 million), E363 million was for outstanding deductions for pensions and cooperatives due in May 2018. The minister said government tries everything possible to make sure that in spite of the cash flow challenges, priority payment such as salaries and other statutory transfers like elderly grants were met.  Dlamini said it was essential that government reduced its spending to financeable levels by identifying areas for possible cuts and cost-saving. This would, however, require a supplementary budget to reduce the Appropriation Act for 2018/2019.

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