Govt to borrow US$1,4bn

Source: Govt to borrow US$1,4bn – The Zimbabwe Independent

TAURAI MANGUDHLA

GOVERNMENT has announced a plan to borrow ZW$146,8 billion (about US$1,4 billion) in 2022 to fund various infrastructure development projects.

This debt would add to the existing stock of US$13,7 billion, according to a paper of debt trends released yesterday.

The debt will be sourced through issuance of government securities, utilisation of the International Monetary Fund Special Drawing Rights (SDRs) allocation and external loan disbursements, Finance minister Mthuli Ncube said.

The IMF SDRs were received in August as part of a big global package announced to stabilise the global economy in the aftermath of the Covid-19 pandemic.

The statement on public debt was presented to Parliament yesterday along with the 2022 national budget.

If the US$1,4 billion is secured, it will increase the national debt to about US$15,1 billion at the end of 2022.

“On domestic borrowing, government will continue to issue Treasury Bills through the auction system for competitive pricing, as well as to improve accountability and transparency. The projected stable macroeconomic environment, characterised by low stable inflation, as well as, stable exchange rate is expected to spur the uptake of medium to long-term government securities by investors,” Ncube said.

As part of deficit financing, government will issue seven-year USD denominated Treasury bonds of up to US$100 million, to be listed on the Victoria Falls Securities Exchange (VFEX) during the first quarter of 2022, earmarked for specific priority infrastructure projects.

“Government has appointed the Infrastructure Development Bank of Zimbabwe (IDBZ) and African Export- Import Bank (Afreximbank) as the Joint Lead Arrangers/Financial Advisors.

“To enhance the credit structure of the USD denominated government bonds, Treasury will establish a dedicated sinking fund to ring-fence the identified carbon tax revenue streams for repayment of the USD government bond,” he added.

Zimbabwe’s public external debt stock was estimated at US$13,2 billion at the end of September 2021. Of this total public external debt, US$5,4 billion was owed to bilateral creditors, US$2,7 billion to multilateral creditors, US$221 million to creditors under the 2015 RBZ Debt Assumption Act and US$4,9 billion is the RBZ’s balance sheet external debt.

RBZ balance sheet external debt of US$4,9 billion comprised of US$1,4 billion guaranteed debt, US$72 million non-guaranteed debt and US$3,3 billion of blocked funds.

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

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

Domestic debt stock as at end September 2021, amounted to ZW$46,6 billion (US$443,8 million), with Treasury Bills (TBs) having the largest share of 80% of the total domestic debt.

Treasury bonds represented 12% of the total domestic debt while domestic arrears represented 8%.

During the period January to September 2021, Treasury made debt service payments to external creditors amounting to US$44,2 million, the report said.

Government, in August 2021, received its Special Drawing Rights (SDRs) allocation amounting to US$958 million from the International Monetary Fund (IMF) under the general allocation of US$650 billion injected into the global economy to help economies recover from the Covid-19 pandemic.

Ncube said the SDRs will be utilised over a period of three years, with an amount of US$311 million expected to be disbursed towards social programmes:procurement of Covid-19 vaccines (US$71 million);  vaccine roll-out programme (US$6 million); procurement of Covid-19 related medical and testing equipment (US$10 million); support for agriculture productive social protection schemes for rural and peri-urban households (US$80 million); and support to the road infrastructure programme.

These are the Harare – Beitbridge Road, Masvingo Road Interchange Development Project and Emergency Road Rehabilitation Programme (US$144 million).

SDR disbursements of US$145 million will go towards the social, agriculture, industry and infrastructure sectors.