Zim’s domestic debt soars again


Ngoni Chanakira

ZIMBABWE’S domestic debt has once again increased from $446 billion in May to $542 billion as at the end of June.



rdana, Arial, Helvetica, sans-serif”>At the same time the country’s savings have declined significantly from above 22% of gross domestic product (GDP) in 1995 to below 10% in the past two years.


The Reserve Bank of Zimbabwe (RBZ) in its Weekly Economic Highlights for the period ending July 18, said reduced spending on investment goods was reflected in collapsing private and public infrastructure, deteriorating stock of capital, as well as de-industrialisation.


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


However, RBZ weekly advances to government steadily declined during the period from $50,3 billion on May 16 to $11,3 billion on June 27.


The bank said as of May 16 the government’s domestic debt stood at $446 101 900 000. This shot up to $460 374 400 000 on May 23, $493 648 600 000 (May 30), $496 556 000 000 (June 6), $490 641 900 000 (June 13), $508 948 400 000 (June 20) and $542 235 300 000 (June 27).


During this time the RBZ’s weekly advance to government however declined from $50 291 200 000 on May 16 to $12 864 900 000 (May 30 and June 6), $12 258 900 000 (June 13), $5 293 200 000 (June 20), and $11 334 800 000 on June 27.


The central bank said it was worrying that Zimbabwe’s consumption levels had risen significantly, from around 80% of GDP in 1995, to over 100% in the last two years.


“Consumption levels in excess of 100% are particularly worrying, as they signify that, as a nation, we are living beyond our means,” the RBZ said in its latest report. “It also implies that investment is financed from sources other than domestic resources, which is only made possible by accumulating balance of payments deficits.”


The bank said both private and public sector consumption levels rose significantly over the last decade.


The rise in government consumption – largely reflecting recurrent expenditure – had been reflected in persistent fiscal budget deficits, which had averaged 10% of GDP since 1990.


“Private consumption, representing the nation’s unwillingness to forego current consumption, also rose to over 50% of GDP, in 2001,” the RBZ said. “Regrettably, the private sector’s high propensity to consume, has been reflected in increased spending on non-essential and speculative activities, which fuel inflation, currently at 364,5% as of June 2003.”


The central bank said the decline in investment had been mirrored in concomitant decline in real economic activity, across major sectors of the economy.


“In particular, shrinkage in key sectors of agriculture, manufacturing, mining and construction, resulted in a fall in real GDP growth rates, from 9,7% in 1996, to an estimated minus 12,1% in 2002,” the RBZ said.