ZIMBABWE’S domestic debt has soared to over $21 trillion, increasing by 165% inside one month.
The unprecedented rise
in government debt levels which over the years was sparked by huge interest payments this time ballooned due to the central bank’s advances to government, according to figures obtained this week.
Reserve Bank of Zimbabwe advances to government accounted for 88% of total debt or a hefty $ 18,7 trillion.
Interest payments have for years remained over 70% of the total debt, a situation bank economists said was evident that government was broke and had no other source of income other than the domestic market.
The figures indicate that government debt had surged to $21 trillion on November 21, from $7,9 trillion on October 21.
The debt had opened 2007 at $175,6 billion.
The interest payments for treasury bills, accounted for $5,9 trillion, three times the amount issued which was $1,8 trillion during the period under review.
The new debt levels mean that with an estimated population of 13 million, every citizen owes $1,6 million to the local banks and financial institutions.
Four in every five Zimbabweans is living below the international poverty benchmark of US$1 per day.
Genesis group economist, Brains Muchemwa, said government’s propensity to rely on borrowed funds has pushed the domestic debt up.
“It’s evident that the solvency of government is already seriously compromised with the current interest rates, and technically government finances will not be better with even a 1% rise in interest rates,” Muchemwa said.
The increasing government debt stock raised fresh fears of renewed turbulence in the crisis-sapped economy, battling with high inflation currently topping 150 000% according to figures from the International Monetary Fund.
“The surge in domestic debt was because of high interests on the market which were in line with the inflation rate,” said Muchemwa.
Analysts said the debt stock was likely to rise further on increased borrowing by government to finance the import of wheat and maize.
They said government will borrow more funds to finance other recurrent expenditure like civil service salaries.
Government has been forced to rely on domestic borrowings because their tax revenue base has dwindled because of company closures which have led to retrenchments.
This means that government that in real terms the government is collecting less money through corporate and income tax.
Independent economic consultant, John Robertson, said the major effect of rising government debt would be an escalation of the inflationary rate due to increased recourse to the domestic market for funding.
With inflation above 150 000% government’s huge appetite for cash is also likely to spur increased money printing, pushing money supply growth currently.
The money supply growth was at 17 806,8% in August.
The fact that Zimbabwe has no access to international capital has only made the situation worse.