The ManicaPost
Kudzanai Gerede Business Correspondent
As the Mid-term monetary policy statement announcement by the Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya draws near, there is growing anxiety on how the Central Bank will be able to balance between tackling the fiscal deficit and restricting public sector borrowing without further issuance of Treasury Bills which are chocking the domestic financial market.
Owing to a huge fiscal deficit, Government has been relying on domestic borrowing through issuing Treasury Bills (TBs) which are now in excess of US$ 2 billion to meets its expenditure account dominated by the public sector wage bill.
Despite the Minister of Finance and Economic Planning, Patrick Chinamasa stating that the public wage bill has been restricted to about 60 percent of total budget due to job freezes and other austerity measures in the public sector, analysts say Government’s huge footprint on the domestic lending market remains precarious for private sector growth.
Economic analyst Pepukai Chivore told Post Business that further borrowing had a negative effect on domestic investment at a time foreign direct investment was very minimum.
“The mid-term monetary policy statement should address the issue of accumulating debts from Treasury Bills. Government continues to weaken its capacity to repay by further using this instrument and further exposes financial risks on domestic debt instrument holders and local financial institutions,” said Chivore.
There is also growing sentiment on the update of the country’s position on repayment of the World Bank and AFDB debt following the successful clearance of the IMF debt in October last year as this was the panacea to international capital markets access.
Also central to the monetary policy statement will be permutations on easing the current liquidity and cash challenges ensuing from fiscal indiscipline, cash hoarding and externalization of funds.
The RBZ monthly economic review for April shows that out of US$ 6.1 billion of broad money supply only 2.51 percent of the total was the currency in circulation which falls far below the international best practice of an optimal level of 15 percent.
“The solution is on addressing market indiscipline. The emergence of a three tier pricing system is distorting the market price of goods and services as business is now charging variably on hard cash, mobile money transfers and RTGs transactions,” added Chivore.
Another economic analyst Persistence Gwanyanya hinted on confidence building measures to address investor apathy amid policy inconsistencies.
“No movement has been made with regards to amending the Indigenisation and Economic Empowerment Act to bring it in line with a policy clarification issued by the President in April 2016,” he said.
