Net credit to Govt at US$1,23 billion as revenue inflows dwindle


Reserve Bank of Zimbabwe

NET credit to Government accounted for 24,6 percent of national credit in the half year to June as reliance on the domestic market continues to grow in light of declining revenue flows.

Government also lacks external budgetary support.

According to the Reserve Bank of Zimbabwe’s quarterly report for June 2015 released on Friday, net credit to Government stood at US$1,23 billion, a quarter of the US$5,03 billion domestic credit.

While borrowing to fund essential infrastructure is vital in any economy, Government seems to be borrowing in order to finance recurrent expenditure a situation which most economists say will eventually raise the tax burden as it will require more revenue to service. High Government borrowing today also adds to the accumulated national debt overhang which in turn will increase the future interest payments and is a burden on the future generations of taxpayers

The figures show there was a significant increase in the net claims at the start of the second quarter right through to June. In the same period, according to the International Monetary Fund, Government also acquired a $200 million loan mainly to restructure existing obligations

Latest statistics from the Accountant-General’s office show that Government made treasury bills repayments of $135.6 million and loans repayments of $228.1 million in the eight months to August.

Analysts say that while it looks like Government is repaying its debt without hiccups the reality is that they are simply rolling over – issuing new TBs to pay off old ones. The amount of TBs outstanding is increasing even further with the payment of the 13th cheque looming in the horizon. “If Old Mutual and NSSA fail to take them up on private placements, Government might find it difficult to repay the old maturing ones. Is it not possible that some of the funding is coming through by way of deposits for projects?” said an analyst with a local firm.

In the eight month period, total revenue including retained revenue amounted to US$2,34 billion while total expenditure including retained grants was at US$2,53 billion resulting in a US$240 million deficit. FinX

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