HARARE - The government’s debt has ballooned to $1,4 billion at the end of 2015 in a clear sign of the President Robert Mugabe administration’s failure to curb excessive spending.
In its first quarter 2016 analysis of the Zimbabwean economy, South Africa-based NKC African Economics (NKC) said the central bank holdings of government debt increased from $462,43 million in November 2014 to November 2015 — representing a 194,06 percent year on year rise.
On a month-on-month basis, net government credit increased by 8,51 percent in November 2015 as treasury bills held by commercial banks and building societies increased by 15,81 percent year on year.
“However, the value of paper held by these institutions fell by 58,83 percent month-on-month as our outstanding bills held by these entities totalled $364,1 million in November 2015, up from $338 million at the end of 2014,” NKC said.
The issuance of bills is done on a direct basis to cover some of the fiscally strained government’s expenses and does not involve the advertising or auctioning of paper.
The NKC update comes as the Zimbabwe Economic Policy and Research Unit (Zeparu) recently warned that government debt had been steadily increasing in comparison to private sector borrowing, a factor expected to crowd out private sector borrowings.
Presently, the private sector has the largest share of domestic credit.
But, the share is declining as government borrowing increases, which risks a higher future debt burden for government.
As at November 2015, total credit to the private sector stood at $3,8 billion as government borrowings were estimated at about $1,2 billion with the total domestic credit structure standing at a little over $6 billion.
According to Zeparu, the nature of government borrowings is going to increase the future debt burden on the government budget, especially seeing as most of the borrowing is for non-investment purposes.
Loans and advances to the private sector increased over the period January to November 2015 to $2,96 billion from $2,88 billion in the comparable period in 2014, according to Zeparu data.
Agriculture received the largest share of credit in 2015, accounting for 19,6 percent of total borrowings from local banks.
Individuals received the second largest share and its share has also increased in 2015.
The shares of mining, distribution, construction, conglomerates and transport sectors have declined in 2015 while those of services, communication, finance and investments and financial organisations have increased.
According to Zeparu, government’s expenditure in 2015 exceeded total revenue to close the year with a deficit of $361,73 million which was financed through domestic loans and treasury bills.
The total government revenue collected declined by 4,54 percent from $3,36 billion collected in the comparable period in 2014.
In contrast, Government expenditure and net lending increased by 0,37 percent, mainly driven by employment costs and interest payments on domestic debt.