Zim domestic debt soars to $572b


Ndamu Sandu

THE country’s domestic debt has soared to $572 billion as government plunges headlong on a borrowing spree.



ns-serif”>Latest figures from the Reserve Bank of Zimbabwe (RBZ) show that as of July 18 the domestic debt was $572 billion up from $542 billion in June.


Figures show that in July there were no RBZ advances to government.

In the same period, the money market recorded an average daily shortage of $4,5 million compared to a shortage of $681,6 million in the previous week.


The RBZ said withdrawals were mainly through government revenue collections and Treasury Bill issues.


According to the RBZ figures, as of July 18, cumulative tobacco sales amounted to 34,3 million kilogrammes at an average price of US$2,08 per kilogramme.


This compares to 53,1 million kilogrammes sold at an average price of US$2,07 per kilogramme during the corresponding period last year.


Economic commentators warned this week that the figure would continue skyrocketing if government does not put a halt on its appetite for borrowing.

“The surge in domestic debt reflects the high appetite by government to borrow from the domestic market,” said Trust Bank Corporation economist David Mupamhadzi.


Mupamhadzi said government’s borrowing from the domestic market was a result of the impasse between it and the international community.


“Government has been left with no source hence the domestic market,” said the economist.


He said such borrowing would crowd out private investment as government and the private sector are competing for the same source.


As a result, Mupamhadzi said, this would push up the budget deficit at the end of the year.


Mupamhadzi said in terms of policy at this rate of borrowing by government it becomes important for it to reduce interest rates to minimise the cost of funds.


“The increase in the domestic debt is one of the reason why government would want to see interest rates low to minimise the cost of funds because it is the largest borrower from the domestic market,” said Mupamhadzi.


Economic consultant John Robertson said government was facing a major crisis, which it has not admitted.


“Government is facing a major crisis… there will be more inflation and a bigger budget deficit,” Robertson said.


He said the way forward to reduce the domestic debt was to seek help from outside the country of which the country did not qualify.


He said the major problem was that people were paying low interest rates for the past two years.


“As such lenders have no money to lend,” said Robertson.


“With the recent salary increments awarded to civil servants and the latest year-on-year inflation figures expected soon, the debt will rise even further,” said an analyst.