HomeBusiness DigestGovt debt soars to $21 trillion

Govt debt soars to $21 trillion

Eric Chiriga

GOVERNMENT domestic debt, which had significantly declined since the beginning of the year, has increased to $21 trillion as at June 2006, statistics from central bank revealed.

The figure is the highest since January 2003.

This develop

ment comes after local economic analysts had warned that the debt would increase further, from $15,7 trillion in March 2006, due to hefty salary increments awarded to civil servants by government.

The salary increases were also expected to push up government’s wage bill to well over 50% of gross domestic product.

According to the Reserve Bank of Zimbabwe statistics, the total domestic debt stood at $21,06 trillion on June 2 while on May 12 it was $16,4 trillion.

The debt jumped from $16,4 trillion to $21,45 trillion and $22,35 trillion on May 19 and May 26 respectively.

On February 24, 2006, the domestic debt was $14,2 trillion, dropping marginally to $13,7 trillion on March 3, 2006.

It had reached a high of $15,9 trillion at the end of last year, having opened the same year at $3,3 trillion.

Local economists and analysts have always blamed government borrowing to finance recurrent expenditure without production.

“The debt is likely to increase further as the government needs $15 trillion to double the police force,” economist John Robertson said. 

He added that this will result in a further increase of the debt because the money is borrowed to finance recurrent expenditure.

Robertson added that once government decides to print more money, as hinted by the authorities, it would aggravate inflationary pressures. 

The government recently printed $21 trillion to pay up the International Monetary Fund debt, a move many observers said had helped stoke inflation, which reached 1 193% year-on-year for May.

The government’s domestic debt consists of stocks, treasury bills and central bank advances.

Last year the total domestic debt grew by close to 1 000%, which central bank governor described as unsustainable. The government has resorted to the domestic market to finance its budget due to lack of financial support from bilateral and multilateral donors. — Staff Writer.

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