HomeBusiness DigestGovt debt soars 1 037%

Govt debt soars 1 037%

Eric Chiriga

THE Reserve Bank of Zimbabwe says total government debt has grown by an unsustainable 1 037%.

Presenting his monetary

policy statement for the third quarter 2005, RBZ governor Gideon Gono said government debt had contributed to the 249% annual growth in money supply, which fuelled inflation.

From 1998 to 2004, the average proportion to domestic credit of government debt was rising from 23%, to 24,6% (1999), 32,4% (2000), 41,6% (2001), 32,5% (2002) and declined somewhat to 22,4% and 17,6% in 2003 and 2004 respectively.

It currently stands at 37,5%.

Gono said the increase in the credit to government reflects mainly grain imports against the background of the current drought as well as fuel imports.

The annual growth in credit in the private sector was 302,5% in August 2004 before declining to 134,4% in December 2004 and 60% in June 2005.

But the private sector continues to command the biggest share of domestic credit, averaging about 70% of total domestic credit in the late 90s through to 2004.

The average private sector credit for 2005 stood at 55,3%.

Gono said annual credit to public enterprises grew by 660,6% in August this year, reflecting disbursements made under the Parastatal Reorientation Programme and the Local Authorities Reorientation Programme.

Some of the institutions that were given money under the LARP include Air Zimbabwe, Civil Aviation Authority of Zimbabwe and National Railways of Zimbabwe who got $509,4 billion, $73,4 billion and $69 billion respectively.

Gono said annual growth in reserve money that had declined from 383% in July 2005 to 235% in August increased to 285% in September 2005.

“In absolute terms, reserve money growth increased from$6,4 trillion in July 2005 to $7,3 trillion in September 2005,” Gono said.

He said the growth in reserve money emanated from the significant increase in demand, which increased from $4,8 trillion in July 2005 to $6,5 trillion in September 2005.

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