Zim redeems TBs worth $200m

HARARE - Zimbabwe has so far paid out approximately $200 million towards maturing Treasury Bills (TBs), Finance minister Patrick Chinamasa said.

TBs are short-term most marketable money market securities that mature in one year or less from their issue date.

Presenting his Mid-term Fiscal Policy statement last week, Chinamasa said Treasury mobilised $205 million as at June 30, 2015 to support government priority expenditures.

This comes as the country’s cash budgeting system has crumbled as revenue continues to diminish due to the tough economic environment.

The government relies almost entirely on tax collections to fund its operations, but has consistently failed to meet targets as the economic base continued to shrink while expenditure continues to soar.

As a result, the cash-strapped government has resorted to borrowing — using TBs — to fund recurrent expenditure, a move critics say could crowd out the private sector from the limited liquidity available in the market.

Statistics from the central bank show that TBs issuances by government have grown 142 percent for the year to December 2014, on the back of dwindling fiscal revenue and an economic meltdown.

However, economic analysts say government should lead by example through its National Budget as well as through the formulation of policies that encourage investment in productive capital projects that can generate income that allows the country to pay off its debt.

“Closely linked to this issue is the current appalling state of national savings which are an important source of productive capital for the economy. Because the country has no savings at this juncture, it has therefore become heavily reliant on borrowings to finance its investment and consumptive activities,” said a renowned economist.

Concerns have been raised over the fact that most of the borrowed funds are being channelled towards consumptive expenditure both in the public and private sectors of the economy, which is why nonperforming loans were extremely high at 16 percent as at December, 2014, up from 15,92 percent the previous year.

The economist said government should reduce its reliance on local capital to finance its deficit as it would mean less money for lending to companies in the productive sector.

The challenges facing the local industry include the liquidity crunch, lack of competitiveness of locally-produced goods, aged infrastructure and power cuts.

“Using funds raised from TBs to fund recurrent expenditure will deprive the productive sector of affordable capital and also leave a huge and unnecessary debt burden to future generations,” she said.

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