ZIMBABWEâ€™S domestic debt stood at $56,9 sextillion ($56,9 trillion) at December 31, a significant rise from $390,5 million on August 15 last year.
The countryâ€™s external debt stock stood at US$4,69 billion during the same period, about two and half times the size of the 2009 National budget presented on Thursday last week.
With an estimated population of 12 million, every Zimbabwean owes banks and financial institutions $4,7 million.
This also means every child being born in Zimbabwe will be under the yoke of government domestic debt.
According to the Reserve Bank, medium to long-term external debt continues to dominate the external debt stock accounting for 95,2% of the total amount.
The remaining 4,8% is short term debt.
â€œOf the countryâ€™s total external debt 95,3% is owed by government and parastatals while 4,7% is owed by the private sector,â€ said Reserve Bank governor, Gideon Gono when presenting his first monetary policy in his second term on Monday.
Gono said the surge in domestic debt position largely reflects the increasing cost of financing government expenditure, not matched by the corresponding increase in revenue inflows.
The resultant funding gap was financed by recourse to the domestic financial market.
The Reserve Bankâ€™s advances to government have over the past five years accounted for about 80% of total debt, a situation bank economists say was evidence that government was broke and had no other source of revenue than the domestic market.
The mismatch between fiscal revenues and expenditures also opened a significant funding gap resulting in government utilising the overdraft window at the Reserve Bank, whilst at the same time borrowing from the domestic debt.
Figures from the Reserve Bank show that the solvency of government was already seriously compromised with the current interest rates, and technically government finances will not be better with even a 1% rise in interest rates.
The increasing government debt stock raised fresh fears of renewed turbulence in the crisis-strapped economy, battling with high inflation estimated to be over 10 billion. percent.
Government has also been forced to rely on domestic borrowings because its tax revenue base has dwindled because of company closures which have led to retrenchments.
This means that in real terms, the government is collecting less revenue through corporate and income tax.
The major effects of rising government debt would be an escalation of the inflationary rate because of increased recourse to the domestic market for funding.
â€œThe contribution of medium-term debt in the portfolio, which was about 63,5% at the beginning of 2008 is eclipsed by 365 days treasury bills which accounted for 99,999% of the total government debt portfolio by end of December 2008,â€ said Gono.
The increase in the proportion of 365 day treasury bills has concentrated the maturity profile of government debt within a short space of time thereby exposing the portfolio risk.
The average duration of the portfolio is less than one year implying that government rolls-over the whole portfolio to refinancing risk.
â€œGovernment is urged to issue long term instruments that help smoothen the maturity structure of its portfolio,â€ Gono said.
During the period under review, the monetary banking sector remained the major holder of government domestic debt at 99% of the total.
Commercial banks accounted for about $424 quadrillion ($424 040) or 99% of the monetary banking sectorâ€™s holding of domestic debt.
The remaining 1% is accounted for by insurance companies, pension funds, financial institutions and private investors.
As the countryâ€™s debt continues to increase, money supply growth continued on an upward trend, in part as a reflection of the prevailing macroeconomic imbalances under which government sector has largely relied on domestic bank finance.
â€œBroad money supply (M3) growth increased sharply from 81 143,1% in January last year to 658 billion percent in December last year,â€ said Gono.
The growth was largely underpinned by money creation related to speculative activities on the parallel foreign exchange and stock market.
The domestic debt figure has a huge bearing on the returns that investors will be getting from the money market. The money market is bound to continue issuing investors with negative returns in the short-term to minimise the harmful effects of the huge interest cost component on the debt figure.
Meanwhile throughout last year the money market experienced high liquidity levels.
The high liquidity injections were mainly due to inflation driven government expenditures, largely related to the 2008 national elections and support for economic and social development programs.
As a result the money market surplus surged significantly particularly during the last quarter of the year. As a result of the liquid conditions on the money market, money market interest rates have remained generally depressed.
Deposit rates of the 7-30 day category averaged around 52% since September last year, while 60-90 day deposit rates remained in the region of 150%.
The interbank rate has been generally insignificant, reflecting lack of activity on the interbank market on the back of surplus liquidity conditions.
Â BY PAUL NYAKAZEYA