In January, Hon. Minister Zhuwao went further to stress that those who did not meet the indigenisation threshold should close their shops including banks. This affected confidence in the banking sector. If you look at the records, you find that cash shortages and panic withdrawals started increasing from December 2015, January 2016 going forward. There was a run by depositors for their money. Companies started withdrawing money and externalising the funds because they were not sure about the policy inconsistencies of Government. So, that has had an impact on the financial situation or balance sheet of banks.
The second problem is the LIMA Agreement. In September last year, the Minister of Finance and Economic Development gave an undertaking to the World Bank and IMF that Zimbabwe would settle its debt arrears of US$1.8 billion by April this year and since LIMA in September 2015, the Ministry of Finance and Economic Development has been struggling to raise the US$1.8 billion to mop up all surplus money on the money market. They have been doing this by issuing Treasury Bills, they have been doing this by taking money from nostro accounts at the Reserve Bank to pay recurrent expenditure and so on and so forth. So in my opinion, the LIMA Debt Agreement has also affected the liquidity of the money market because Government has been pressurised to look for every available cash flow in preparation to fund the debt agreement.
I go on to the Government borrowing and lack of fiscal space. Mr. Speaker Sir, it is common cause that from 2013, fiscal revenues have been stuck at US$3.8 billion a year whereas recurrent expenditure has been increasing to US$4.8 billion. So, recurrent expenditure grew from US$3.8 to US$4.8 billion annually since 2013. So, there has been a revenue gap which Government has not been able to sustain. You add on the US$1 billion deficit, you add the RBZ debt of US$1.3 billion which was taken over by Government, you also add the US$400 million non performing loans which were sitting on the loan books of banks that was taken over by Government; that accumulates into Government debt. You also take into account the US$2 billion Treasury Bills which Government has issued as a way of financing recurrent expenditure. This has taken heavy stock on Government’s financial position.
Can we go to the next table? If you look at that table, you can see the growth of revenue versus the growth of expenditure and the budget deficit since 2009. You find that, I will start at 2011, revenue was US$2.8 billion and expenditure was US$2.7 billion, but look at how revenue has lagged behind. By 2014, revenue was stuck at US$3.8 billion while expenditure grew to US$4.8 billion such that since 2014, Government has been accumulating a monthly deficit of between US$100 million and US$150 million because the revenues have not been performing and that revenue gap has caused borrowing.
Government to come into the money market, issue Treasury Bills. When you issue Treasury Bills, most of the institutions that bought Treasury Bills are banks. I know one building society which I will not name for ethical reasons which oversubscribed to these bills and when the maturity date arrived, Government had no ready cash to pay back the money to that building society. So, the debt was rolled over. So, this affects the balance sheet of that bank and today, it is one of the banks which is being threatened with collapse. Mr. Speaker Sir, I have said I will not, for ethical reasons, name the bank.
Continued next page
(336 VIEWS)
