By Daniel Chigundu
Zimbabwe’s government has faced significant challenges in securing borrowings to finance a budget deficit of ZiG 2.3 billion, according to the 2024 Mid-Year Budget Review.
The deficit arose as expenditure outpaced revenue collections, with revenues totaling ZiG 36.5 billion against expenditures of ZiG 38.9 billion as of June 30, 2024.
Finance Minister Mthuli Ncube noted the difficulties in attracting investors for long-term instruments, as they favored short-term options amid a high inflationary environment.
‘’During the period January to June 2024, central government borrowing for budget financing was done through the mobilization of resources on the domestic debt market.
‘’The total gross Treasury Bills (TB) issuance, for budget financing for the period January to June 2024 amounted to ZiG1.77 billion (ZiG1.11 billion and US$56.4 million) against a target of ZiG2.3 billion.
‘’The total borrowing for the period January to June 2024 was below the target, as institutional investors had a preference for short-term instruments, due to the high inflationary environment, and hence very high ZWL$ coupon rates.
‘’As a result, Treasury could not accept some of the offers from the various investors. The Treasury bill issuance was done through private placement, with 90-day-72% and 120-day-73%,’’ read the budget review statement.
Zimbabwe’s financial struggles
Zimbabwe’s financial struggles are exacerbated by poor revenue collections and a lack of credit lines from international lenders, largely due to alleged human rights violations. Local companies face challenges such as unreliable utilities and a lack of competitive advantage, further straining the economy.
The country’s tax revenue accounts for about 92.9% of total collections, with non-tax revenue making up the remaining 7.1%.
From January to June 2024, government employee compensation comprised approximately 46.8% (ZiG 18.2 billion) of total expenditures, with ZiG 7.5 billion allocated to operations, ZiG 368 million to interest payments, and ZiG 10.6 billion to capital expenditures, including devolution.
Mthuli struggles to secure borrowings for budget deficit amid inflation concerns
Mthuli struggles to secure borrowings for budget deficit amid inflation concerns
