THE country’s more than $354 billion domestic debt will continue to soar because most ministries have finished their 2003 votes and government is now forced to borrow to meet its financial re
Analysts contacted this week said because Zimbabwe’s revenue base was dropping, the economic situation would “get worse before it gets better”.
They said the level of government domestic debt would remain a major challenge to macroeconomic stability.
While the country’s domestic debt has begun to steadily decrease from February this year, analysts say it is still too high when compared to capital inflows.
The domestic debt, which stood at $205 billion in December 2001, rose dramatically to $346 billion by the end of December 2002.
With 96% ($331 billion) of the debt being Treasury Bills, interest costs pose a significant fiscal challenge.
National Economic Consultative Forum (Necf) spokesman Nhlanhla Masuku in an interview said the country’s domestic debt would continue to be a headache as long as government subsidised “consumer items”.
The Necf comprises 150 individuals from all walks of life appointed by President Robert Mugabe to try and devise solutions to the country’s economic problems.
Masuku said: “Government should immediately remove all subsidies on fuel, bread and maize meal. This will deter Zimbabweans from becoming too dependent on the government.
“On the foreign debt, government should just apply for debt-cancellation because the policies we have been following were wrongly given to us by the IMF and World Bank in the first place.”
However, analysts said removing subsidies would result in prices of fuel, maize meal and bread going beyond the reach of the already impoverished population.
Last month a three-day stay away was successfully organised by the Zimbabwe Congress of Trade Unions (ZCTU) to try and force government to reverse the 300% fuel price hike.
NMB Holdings Ltd chairman Paddy Zhanda in an analysis of the economic situation said: “The domestic debt is expected to rise further in 2003, fuelled by the need to fund grain imports and financial support for the new farmers under the current agrarian reforms.”
Zhanda said the continued isolation of Zimbabwe from the international community was cause for concern and the operating environment would likely continue to be “turbulent as government wrestles to contain runaway inflation, shortages and the lack of foreign currency inflows and a deteriorating balance of payments position”.
The Reserve Bank of Zimbabwe (RBZ) in its latest Weekly Economic Highlights for the period ending March 2003 said government’s domestic debt stood at $354,1 billion as at March 21 this year.
The debt has been swaying from $367,7 billion on January 31 2003 to $372,4 billion on February 28, and then down to $369,9 billion on March 14.
Since February 21 the RBZ has been advancing $28,8 billion weekly to government for various undisclosed projects.
The RBZ said lending to banks and net credit to government continued to increase.
In an interview this week economist John Robertson said revenue was falling, ministries were overspending and “all indications are that it will get worse this year”.
Robertson said: “Government is paying civil servants huge amounts. If it cannot get money from taxes, it will borrow from the RBZ and if it cannot borrow from the RBZ it will print resulting in higher inflation.”
Inflation is currently at 228%, but Robertson said it would soar to at least 350% soon.
He said it was however “very encouraging” to see Zanu PF and the MDC try to engage in talks through the three African leaders who jetted into Zimbabwe on Monday this week.
Robertson said such talks could go a long way in trying to help solve the economic crisis facing the nation.
South African President Thabo Mbeki, Nigeria’s General Olusegun Obasanjo and Malawi’s Bakili Muluzi were in Zimbabwe on Monday and held separate talks with President Mugabe and the MDC’s Morgan Tsvangirai. Although there were sticking points, the negotiations route now appears open.
Robertson said: “It is good to nip the problem in the bud by stopping the rot at its origins. There is lack of investor confidence and all our economic problems are the result of our political problems, so it is pleasing to note that the leaders are tackling the root cause – which is our bad politics.”
Zimbabwe has been isolated by the international community, especially influential groupings such as the European Union, the United States, the Commonwealth and major donor organisations such as the International Monetary Fund (IMF) and the World Bank.
These groupings have regularly criticised Zimbabwe’s poor human rights record, abuse of the judiciary, as well as the controversial land resettlement programme and the 2002 presidential poll.
The Necf’s Masuku said: “We welcome the talks as long as the leaders are giving us practical solutions to our problems. Zimbabweans must however learn to help themselves by coming up with their own solutions and not keep seeking advice from foreigners.”
He said help was needed especially in trying to solve rampant corruption and insider trading which “is prevalent in Zimbabwe today”.
In an analysis of the country’s balance of payments position, Trust Holdings Ltd chairman Tichaendepi Masaya said balance of payments prospects remained bleak due to continued decline of exports, drying up of investment inflows and international support.
Masaya said: “This is exacerbated by the negative perception of the situation in the country, which is adversely affecting the country’s risk rating. This is making it difficult for both the public and private sectors to secure offshore lines of credit.”
He said efforts should be made to improve relations with the international community and enhance international partnerships.
In an interesting development last month Finance and Economic Development minister Herbert Murerwa and RBZ governor Leonard Tsumba on April 14 met with IMF managing director Horst Kohler on the sidelines of its annual spring meetings in Washington.
Insiders said this was the beginning of a government bid to patch up the frosty relations with the Bretton Woods Institutions who are very influential.
Masuku however advised Zimba-bweans to adopt the new National Economic Revival Programme (Nerp) and avoid IMF and World Bank policies, saying they were not “home grown”.