Zimbabwe's domestic debt rose by 44,31 percent between November 2016 and November 2017 as Government spent beyond budgeted expenditure, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said.
Presenting the 2018 Monetary Policy Statement in Harare yesterday, Dr Mangudya said that the figure, which stood at $7,6 billion in November 2016, ballooned to $10,6 billion in the same month in 2017, as Government resorted to borrowing to cut the budget deficit.
"Domestic Credit Bank lending to local economic agents grew by 44,31 percent, from $7,554 billion in November 2016 to $10 637,23 million in November 2017. Of this growth, net credit to Government rose by 70,45 percent to $6,271 billion, while credit to the private sector rose by 6,97 percent to $3,705 billion," said Dr Mangudya.
"The increase in credit to Government continues to reflect increased reliance by Government on the banking sector to finance its budget deficit. The substantial increase in money supply is therefore a reflection of the expansionary fiscal stance, which has continued to increase RTGS money from $954 million in 2016 to $1,732 billion in 2017.
"The increase in the RTGS position was largely driven by increased Government financing through the overdraft at the central bank and the issuance of Treasury Bills and Bonds, which increased from $3,2 billion in 2016 to $5,2 billion at the end of 2017. The increase of around $2 billion largely arose from securities issued for Government projects which include the financing of grain producers as well as for financing agriculture," said the RBZ boss.
The new Government led by President Emerson Mnangagwa, has put the slashing of Government expenditure top of its agenda as it seeks to revive the economy and return to productivity and rapid growth.
The President set the tone when he trimmed his Cabinet by 22 percent to 22 ministers as opposed to the 27 that served under former President Mugabe. Presenting the 2018 National Budget, Finance and Economic Planning Minister Patrick Chinamasa, introduced a raft of measures that are aimed at cutting expenditure, which will in turn have a knock on effect on budget deficit and Government's contribution to the rising domestic debt.
Among the measures will be a target of the Civil Service salary bill where Government will retire workers past the retirement age of 65 years, cut benefits to seniors Government employees as well as offloading non-essential and non performing state enterprises that continue to milk the state.
"Currently, too many grades in the Public Service are provided with vehicles as a condition of service every five years, with the vehicles being licensed, insured, serviced and repaired at Government expense," said Minister Chinamasa in the 2018 national budget presentation. The total outstanding request for condition of service vehicles is now close to $140 million, which the economy in its state cannot afford," he said.