2011 National Budget capital expenditure underutilised

Budget presented by Minister of Finance Tendai Biti show that only 46 percent of last year’s capital expenditure (capex) allocation amounting to US$551 million was utilised, of which only 27 percent was disbursed for development projects.
A breakdown of the 2011 Budget shows that employment costs accounted for 52 percent of the total allocation, with operations coming in at 26 percent and capital expenditure at 20 percent.
This has raised the question of whether Zimbabwe faces a challenge of absorptive capacity in view of some apparent structural constraints.
The apparent poor absorptive capacity (reflected in the underutilisation of the capex budget) could also be largely attributable to the lingering restructuring of the country’s parastatals.
The Minister of Parastatals and State Enterprises has attributed this to the non-existence of a legislative framework for the State Enterprises Restructuring Agency, and lack of commitment on the part of line ministries. To offset the possible problem of absorptive capacity in the economy, economists have suggested that the Government needs to articulate specific policy actions on issues such as the creation of a viable middle income.
It also requires structural reforms necessary for enhanced supply response (including privatisation, commercialisation and civil service rationalisation), labour market reforms and access to international lines of credit.
Economist Mr Joseph Mverecha believes that although the Government has been progressively boosting capex since dollarisation, a major issue that requires attention is capacity constraints.
“The budget is steadily shifting resources more towards capital expenditure and infrastructure.
“This is critical for sustaining medium and long-term growth. The key issue, however, relates to absorptive capacity in the economy.
“There is need to further interrogate the process to establish the real causes of the slow utilisation and these have to be addressed ahead of the implementation of the 2012 Budget to prevent recurrence of Public Sector Investment Programme (PSIP) under-performance,” he said.
The 2012 Budget has been criticised for skimming over some areas that are considered endemic in the present economic environment.
Some of the issues which the Budget gave peripheral reference include: improving doing-business-conditions, zero tolerance for corruption issues around bureaucracy and red-tape (for example at border entry ports), simplified tax laws, strengthening the Tripartite Negotiating Forum and external stakeholder engagement.