Govt continues to blow RBZ funds

Ngoni Chanakira

THE Reserve Bank of Zimbabwe (RBZ)’s weekly advance to government continues to escalate, shooting up from $3,8 billion in early March to $50,3 billion by the end of April.


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The central bank says Zimbabwe’s economy has been contracting since 1996 when both productivity and economic activity nose-dived from their peak attained in that year.


In figures for May released this week, the central bank said weekly advances to government steadily ballooned from $3,793 billion on March 14 to $50,291 billion on May 16.


The RBZ did not shed light on what projects the money had been used for, but analysts speculate that the bulk of this borrowing went to pay salaries of the bloated civil service.


In less than two months the figure more than doubled.


The RBZ said during this time lending to banks increased while credit to government declined.


Total government domestic debt as of March 14 stood at $344,9 billion, which increased to $446,101 billion as of May 16.


The RBZ said: “During the week ending April 30 2003, cheque transactions amounted to $708 billion. Of this, 84,2% constituted high value items, and the remainder, low value. By volume, low value transactions accounted for 80%, while 20% related to high value.”


Despite government insistence that commercial agriculture was flourishing and tobacco chalking up billions, the bank said Zimbabwe’s foreign currency earnings from the golden crop continued to decrease.


The tobacco farming community has not been spared by government’s fast-track land resettlement programme which has witnessed large-scale commercial farmers removed from their land and replaced by new farmers with less experience.


Some of the new farmers diversified into maize production instead of tobacco – a major foreign currency earner.


The RBZ said as of May 9 this year, cumulative tobacco sales amounting to 1,9 million kilogrammes of tobacco had been sold at an average price of US$1,83 per kg.


This compares to 4,7 million kg sold at an average price of US$1,81, during the corresponding period last year.


In its unaudited results for the six-month period ended April 30, heavyweight tobacco firm Tobacco Sales Floors Ltd (TSL) this week told shareholders that urgent attempts needed to be made to revitalise tobacco production over the next few months.


TSL said: “Latest estimates of this year’s tobacco crop indicate a volume of approximately 80 million kg, less than half of last year’s production. The prospects for next year’s crop are similarly poor.”


Government however continues to insist that more tobacco would be sold this year because of the “huge success” of the small-scale farming sector.

The small-scale sector has faced nightmares because tobacco is an expensive crop to grow and commercial banks have refused to lend new farmers money, saying the industry was now high risk.


The RBZ said since 1995 Zimbabwe’s output and productivity had followed a “procyclical pattern”.


This pattern means that the country’s productivity had been rising and falling in tandem with economic performance.


“This confirms the fact that a country’s productivity growth plays an important role in helping it achieve economic growth and higher standards of living,” the RBZ said in its report.