Zimbabwe debt set to balloon

ZIMBABWE is set to finance its 2024 total budget financing gap of ZWL$9,2 trillion through domestic and external borrowing, a development that will further sink the country deep into debt.

According to the latest annual borrowing plan released by the Public Debt Management Office (PDMO), the total budget financing gap amounts to ZWL$9,2 trillion.

It comprises a budget deficit of ZWL$4,3 trillion (1,5% of gross domestic product)  and amortisation of loans and maturing government securities estimated at ZWL$4,9 trillion.

The 2024 National Budget had projected revenues of ZWL$54 trillion against an estimated expenditures of ZWL$58 trillion.

"The gross financing gap will be financed through domestic and external borrowing as follows: Issuance of Treasury bills and bonds amounting to ZWL$5,8 trillion; disbursements from existing external loans amounting to ZWL$367 billion and new external loan disbursements amounting to ZWL$2,9 trillion," the report read.

Further borrowing will balloon Zimbabwe's debt, which is estimated at US$20 billion.

However, the PDMO is optimistic that the uptake for medium to long-term government securities will increase given the projected stable macro-economic environment, characterised by low inflation and a stable exchange rate.

This comes as the macroeconomic environment is characterised by a sharp depreciation of the local currency and high inflation rate, with the International Monetary Fund indicating that the Zimbabwe dollar has lost about 95% of its buying power since December last year.

"Government securities, the baseline assumption is to issue Treasury bills and bonds through the auction system and private placements. From the existing external loans, projected disbursements amount to ZWL$366,6 billion (US$40,8 million)," the report read in part.

"In 2024, new external loan disbursements for budget support and central government projects are projected at ZWL$2,9 trillion (US$330 million)."

"The strategy is to gradually lengthen the maturities of government securities going forward. Uptake for medium to long-term government securities is expected to increase given the projected stable macroeconomic environment, characterised by low inflation and a stable exchange rate."

The report noted that the annual borrowing plan seeks to promote the growth of the domestic debt market by issuing Treasury bills and bonds while the government raises its financing requirements through the auction system to promote medium to long-term Treasury bonds and adherence to prescribed asset status.

"The strategy seeks to promote the development of the secondary market by issuing medium-to-long-term Treasury bonds and to enforce adherence to the prescribed asset status, for insurance companies and pension funds as required by law."

The report noted that the strategy in external financing is to prioritise concessional financing and to limit non-concessional borrowing to economically viable projects.

"The objectives of public debt management in Zimbabwe are provided for in Section 3 of the Public Debt Management Act (Chapter: 22:21) as: "to ensure that government's needs and payment obligations are met at the lowest possible cost over the medium to long term, with a prudent level of risk, and to promote the development of the domestic debt market," the report read.

"The primary objective requires an assessment of cost and risk in relation to government borrowings and debt service. The secondary objective aims to support the development of an efficient and robust domestic debt market."