Govt debt rises three-fold

Eric Chiriga

GOVERNMENT’S domestic debt now stands at $14 trillion, increasing more than threefold since the beginning of the year as government failed to rein in excessive expenditure.


According to statistics from the Reserve Bank of Zimbabwe, as at November 25 total government domestic debt was $14 trillion from $3 trillion on January 7.


The domestic debt is mainly made up of treasury bills, government stocks and RBZ advances to government.


Out of the $14 trillion, RBZ advances to government amounted to $1,5 trillion and treasury bill amount at cost and interest were $5,5 trillion and $6 trillion respectively.


On June 24, the debt had increased to about $11,6 trillion and rose to $12,5 trillion by August 26.


In almost all his national budget statements, the Minister of Finance, Herbert Murerwa, has emphasised that the government should control recurrent expenditure.


While presenting his 2006 national budget statement last week, Murerwa said the financing of the budget deficit had been dominated by domestic bank credit.


“Given this scenario,” Murerwa said, “government will limit recurrent expenditures to revenue generated and only borrow to finance capital development.”


He said the continued dominance of domestic financing of the budget deficit during 2005 pushed the total stock of domestic debt up from $1,7 trillion in December 2004 to $15,9 trillion by the end of October.


“The structure of domestic public debt reflects the dominance of short-term paper (93%), with long to medium-term debt only taking up 7%.”


“This structure of debt is expensive and not sustainable,” Murerwa said.


The domestic debt is expected to increase further because government borrows for consumption, to finance recurrent expenditure, rather than for capital projects.


The major components of the recurrent expenditures are public service employment and social service delivery costs.


Besides borrowing from the domestic market to finance its expenditure, government can also use its overdraft facility with the central bank.


However, there is a statutory limit stipulated by the RBZ Act on the amount the government can borrow, set at 20% of the previous year’s revenue collection.