Mugabe in desperate move to raise bonuses

Hard-pressed President Robert Mugabe's government is issuing Treasury Bills (TBs) in a desperate move to raise money to pay restive civil servants' 2016 bonuses, Finance minister Patrick Chinamasa told the National Assembly last week.

This comes as government buckled under pressure from the agitated public workers, who turned down government's residential stands among other non-monetary offers in lieu of their 13th cheques and threatened to strike, forcing it to add an extra unbudgeted for $180 million to its $4 billion 2017 National Budget.

"Government's decision to pay the unbudgeted 2016 bonuses after pressure from employee unions is likely to worsen the situation as TBs worth $180 million are expected to be floated in the market to finance these bonus payments," Chinamasa said in a 2017 budget analysis tabled in the National Assembly.

He said the move will worsen government's debt situation.

Chinamasa said the country was estimated to have about $2,1 billion worth of TBs in the market as at February 28, 2017, issued to bridge the government's funding gap.

" . . . government decided to clear its contribution arrears to Nssa spanning from June 2013 with TBs worth $180,9 million with tenure of seven years and a coupon rate of 5 percent per annum," he said.

Zimbabwe's total external debt was estimated at $11,2 billion, or 79 percent of GDP, at the end of 2016.

More than half of it, or $7,5 billion, is in arrears.

The cash-squeezed government – facing a critical funding shortfall to bankroll its commitments, including a bloated civil service wage bill, government workers' pension contributions and medical insurance remittances - has turned to the TBs market, churning out millions of dollars' worth of the paper, with economists warning the move is akin to minting fresh cash - a move that risks fuelling inflation and worsening the liquidity crunch.

The bonus deal followed a lengthy deadlock after government was late in paying civil servants, including the army, for several months in a row.

Last month, government paid the scandal-plagued State-run pension fund, National Social Security Authority (Nssa), $181 million worth of TBs to clear three-year arrears after failing to remit its contributions to the fund as an employer.

Tendai Biti, a former Finance minister credited with overseeing Zimbabwe's impressive economic recovery between 2009 and 2013, said "it's in Zanu-PF DNA to print money and just spend as if there is no tomorrow".

"They are printing money owed to civil servants, they have issued $181 million worth of TBs to Nssa, Psmas (Premier Service Medical Aid Society) is also owed, Zesa is owed over $200 million.

"They have to print TBs amounting to $250 million to pay local authorities in utilities, they have to print to pay NetOne and TelOne $100 million, and they have to print TBs. This is on the back of $800 million that have been issued by Zamco (the Zimbabwe Asset Management Company - a special purpose vehicle created to take over non-performing loans [NPLs] from banks as a means of cleaning up their balance sheets)," Biti said.

He said government was also printing TBs to finance help extended to some farmers with inputs under its targeted command agriculture - spearheaded by Vice President Emmerson Mnangagwa - which aims to ensure the country's food self-sufficiency.

"They are printing over $500 million in TBs to finance this cantankerous creature called command agriculture," Biti said. "If you add these figures, they amount close to $4 billion, almost the national budget. We are back in a new regime of economic insanity. This is Chinamanomics," he said, taking a dig at his successor Chinamasa.

"Villagers from St Faith (in Rusape where Chinamasa comes from) can't run this economy, it's not possible," Biti said.

Early this year, the Reserve Bank of Zimbabwe said government had issued TBs under four categories, long-dated TBs of $549 million issued to banks for the acquisition of non-performing loans by the Zamco; long-dated TBs amounting to $300 million issued for the capitalisation of institutions that include the Reserve Bank, Agribank, IDBZ, ZB, Cottco and CAPS; medium to long-dated TBs amounting to $780 million issued under the Reserve Bank Debt Assumption Act for the central bank debt taken over by government; and short-to-medium-dated TBs amounting to $450 million issued to finance the gap between expenditure and revenue collection by government.