The Zimbabwean Government's decision to release the 2024 Annual Borrowing Plan (ABP) has been met with positive reactions from analysts and other key economic actors, who see it as a significant step towards greater transparency and potential redevelopment of a secondary market for State debt.
Last week, the Zimbabwe Public Debt Management Office (ZPDMO) published the ABP that outlines the Government's borrowing strategy for financing the 2024 budget deficit.
This document, gleaned by this publication, details forecasts and intentions for how the Government intends to finance the projected $4,3 trillion deficit and an additional $4,9 trillion needed for maturing loans and Government securities.
Walter Mandeya, an analyst from Trigrams Investment, views the release of the ABP as a welcome sign of transparency.
He believes it offers a "window into the inner workings of Government finances", which is crucial for the redevelopment of a secondary market for Government debt instruments. He further highlights that transparency allows "markets to plan more effectively and provides a method to track money supply growth".
The ABP lays out a plan to raise $9,2 trillion through a combination of domestic and external sources. Domestically, the Government intends to issue $5,8 trillion worth of Treasury bills and bonds.
The remaining $2,9 trillion will come from new external loans, with an additional $367 billion expected from existing external loan disbursements. This strategy reflects a shift towards long-term financing, as opposed to relying heavily on short-term instruments like the National Budget.
While the overall direction of the ABP is seen positively, some analysts raise concerns.
Dr Prosper Chitambara, an economist, said the $9,2 trillion gap may be underestimated due to high inflation in Zimbabwean dollars. He suggested that the actual deficit might be even higher than projected.
"I think the financing gap could even be more than the projected $9,2 trillion given the rate at which prices have been increasing in Zimbabwe dollar terms.
"I think there is a higher likelihood that the deficit will be even greater than what is in the ABP," said Mr Chitambara.
Mr Mandeya suggested that structuring these instruments to account for inflation and exchange rate fluctuations could mitigate this risk. He also emphasises the importance of ensuring these instruments are not subject to "moral hazard" through forced investments by institutions like insurance companies and pension funds.
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Furthermore, Mandeya proposes expanding the ZPDMO's mandate to include "revenue maximisation strategies" as part of its efforts to manage public debt effectively and at a lower cost.
He suggests renaming the organisation to "Zimbabwe Public Debt & (Revenue) Management Office (ZPD(R)MO)" to reflect this broader mandate while clarifying that it would not replace existing institutions like the Zimbabwe Revenue Authority (ZIMRA) or the Reserve Bank of Zimbabwe (RBZ).
Concerns also exist regarding the potential crowding out of the private sector by the Government's issuance of Treasury bills and bonds.
Compared to previous years, the plan shows a higher proportion of domestic borrowing (63 percent) compared to external borrowing (37 percent).
This could potentially reduce dependence on foreign creditors and associated risks like currency fluctuations.
However, some analysts are of the view that dependence on borrowing, even domestically, might not be sustainable in the long run if economic growth is insufficient to generate enough revenue for debt service.
Regardless of the source, any additional borrowing will still increase the overall national debt, potentially hindering future economic growth and limiting fiscal space for future investments.
Mr Mandeya said the success of the plan relies heavily on the Government's ability to manage its debt effectively, such as ensuring efficient allocation of borrowed funds and implementing fiscal discipline.
"Evaluating the plan's effectiveness requires ongoing monitoring and analysis of its implementation and its impact on the broader economic and fiscal situation of Zimbabwe," said Mr Mandeya.
