Government has been warned against the continued issuance of Treasury Bills and the further widening of its overdraft with the Reserve Bank of Zimbabwe as this is putting deepening strains on the economy.
This comes as Zimbabwe’s domestic claims rose 43 percent in 12 months to December 2017, largely driven by net credit to the government, statistics from the Reserve Bank show.
Net claims on government rose 74 percent to $6,25 billion in 2017 from $3,59 billion a year ago, said the central bank, a reflection of increased government participation on the domestic market to raise to money to finance its expanding budget deficit.
Zimbabwe’s budget deficit increased to $1,8 billion or 11,2 percent of the gross domestic product last year from a target of $400 million, and this was largely financed by the Treasury Bills as the government struggled to contain runaway expenditure.
Government has been increasing its reliance on the domestic market to finance the budget deficit resulting from excessive monetary expansion that also triggered a massive huge imbalance between the RTGS balances and nostro balances.
Through the central bank, the Government has been issuing debt instruments to raise money to finance agricultural and grain procurement programmes as well as to expunge the legacy debt of state enterprises and some parastatals. Yesterday, business leaders strongly warned against issuing more treasury bills and overdrafts.
Bankers Association of Zimbabwe president Dr Charity Jinya said creation of money was worsening the foreign currency shortages. She was addressing delegates at the interactive meeting between the President and industry.”
“What we are asking for is we create a situation where we are limiting treasury bills otherwise we will be going round the same mountain on that issue and encouraging use of electronic money so that we free up the available foreign currency to support production.”
She said while the business appreciated efforts being undertaken to manage budget deficit on the mismatch between Government expenditure and revenue, this should not be financed by issuance of treasury bills and overdrafts with the central bank.
The Government also accumulated debt of more than $1 billion owed to suppliers and service providers’ who delivered goods and services to various line ministries.