Treasury sets new public debt sealing

Harare Bureau
GOVERNMENT has set annual borrowing limit guidelines for 2022 in an effort to promote sound public debt management and curb wasteful expenditure that could worsen the already unsustainable high debt situation.

For 2022, the overall annual borrowing limit has been set at 5,75 percent of total gross domestic product (DGP) while the guidelines also entail following proper procedures such as seeking approvals for borrowing and all Government guarantees.

According to Treasury, Zimbabwe’s total public debt as at end September 2021 amounted to US$13,7 billion, comprising public external debt of US$13,2 billion and domestic debt of US$532 million.

The total public debt stock excludes contingent liabilities of US$3,5 billion for the compensation of white former farm owners, which will be incorporated on completion of cession agreements with the farmers.

The annual borrowing limits set by Finance and Economic Development Minister Professor Mthuli Ncube are in line with statutory borrowing requirements.

This also comes as Treasury is working on a three-year Medium-Term Debt Management Strategy (MTDS) 2022 to 2025, which will guide effective and prudent debt management of operations from 2022 to 2025, to achieve public debt management objectives of ensuring that Government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long term.

“Cognisant of the statutory borrowing requirements, the current high debt overhang and debt sustainability analysis under the National Development Strategy 1 (NDS1), the 2022 overall annual borrowing limit is set at 5,75 percent of GDP, which is derived from the budget deficit financing requirements, amortisation of loans and securities and public entities project financing,” said Prof Ncube.

In a statement on public debt for 2022 tabled before Parliament, Professor Ncube set the limit for central government, including borrowing for budget support at 1,5 percent of GDP for budget financing and amortisation of loans and securities.

Borrowing limit for state-owned enterprises, including on-lending from the central Government has been set at three percent of GDP (1 percent for guarantees, 1 percent for on-lending and 1 percent borrowing power authorities).

For local authorities the limit is set at 10 percent of their respective previous year’s revenues, with the overall borrowing limits of all local authorities limited to 0,25 percent of GDP.

State Guarantees to the private sector, for purposes of debt contraction, have been set at one percent of GDP.

“Total guarantees to be issued by the Government in 2022 will be limited to two per cent of GDP. Guarantees to the private sector will only be considered in response to shocks such as Covid-19 pandemic, to stimulate private sector growth” he said.