GOVERNMENT has exhausted all its deposits with the Reserve Bank after placing $332 billion with the central bank in December last year, official figures reveal.
FONT face=”Verdana, Arial, Helvetica, sans-serif”>Figures show that the biggest deposit made by government was on July 30, when it gave the central bank $568 billion.
The deposits declined to $160 billion in November before the last payment of $332 billion in December. By April 22, the government’s overdraft with the central bank had declined to $100,8 billion from a peak of $1, 2 trillion at the beginning of the month.
The latest figures are in sharp contrast to last year’s savings which at one stage saw government’s account in credit, winning it praise from central bank governor Gideon Gono. However, this time around the central bank has raised concerns over government’s borrowings, which it says are highly inflationary.
According to RBZ figures, as of April 22 government domestic debt was $8 trillion, a rise of almost 200% from $2,8 trillion at the end of 2004.
The debt shot up from $2 trillion to $6 trillion in March before reaching the current $8 trillion at the end of April.
Under RBZ guidelines, lending to government is limited to 20% of the previous year’s collected revenue. This however excludes government securities purchased on the secondary market for monetary policy purposes. Based on 2004 revenue estimates, this translates to a statutory limit of $1,3 trillion for this year.
Analysts have warned that high levels of government borrowing will stoke up inflationary pressures. This also crowds out borrowing by the private sector, which is supposed to be the engine for economic growth.
Deputy Finance minister David Chapfika on Wednesday said there was nothing wrong with government borrowing to finance productive sector activities.
“If we are borrowing for consumptive purposes then it becomes inflationary, but when the money is used to finance operations then there is no problem,” he said.
“In real terms government can borrow to finance industry, for example, or anything productive,” said Chapfika.
A senior bank economist this week said failure by government to deposit in its account could have been caused by the recent elections.
“Election costs are generally high. Government does not make its expenditure figures public so we can only speculate about elections and grain imports,” the economist said.
As reported elsewhere in this newspaper, the WFP has put Zimbabwe’s total food needs at US$423 983 468 for April-September.
The central bank is also set to announce a post-election monetary policy which will also take into account the country’s food assistance needs and an expanded cabinet.