It is therefore not surprising that we have issued so many Treasury Bills in value in order to finance this budget deficit in Government. The way these Treasury Bills have been financed also in my view has not been according to best practice so far. Best practice dictates that there should be an auction, it should be subjected to market mechanisms that would have actually made sure that the interest rate we are paying now would have been lower by as much as 3% because on the private placement, that was being implemented before we were paying interest rates of about 10 percent. We know that if we had gone to the market, we would have paid 7% interest saving 3%. Now, we have to continue servicing that extra interest. Therefore, I have decided that the auction system should start and we will probably be doing a small auction before the year-end just to test market to see if it works. It is not a desire to raise funding frankly; there are other ways to do that but it is to test the system to make sure the auction system works.
Mr. President, the overdraft facility between the Central Government and the Reserve Bank of Zimbabwe is huge. It is way above the limit of 20% of the previous year’s expenditure. It should be about $700 million, but right now we are sitting at over $2 billion in terms of that exposure. However, there is a little bit of good news which is that, we have not received as much as $3.3 billion from corporates that have not remitted the taxes that they have collected to ZIMRA on VAT. We are moving quite aggressive to collect that. We can see that we will be able to cover that Reserve Bank hole using the unremitted taxes that have been collected from individuals by the corporates.
Uncollected taxes, if I can break it down, it is about $2.3 billion being the principal, $1 billion being the interest because I have had to borrow to finance that hole. So I have to charge interest on unremitted taxes and penalties for late remittance which is another billion. In total, it comes to $4.5 billion. I am prepared to wave or to reduce the penalty portion so that it is manageable by the corporates. Twenty percent of those unremitted taxes are due to parastatals, our own institutions that we will cajole over time to pay. That is the overdraft facility.
Turning to the financial sector, Mr. President, the money supply stock stood at $9.14 billion in June this year translating to a year on year growth of 40.81%, a huge surge in domestic money supply from a figure of $6.49 billion in June the previous year 2017. It is projected that money supply will grow by 38.2% in 2018 compared to an initial projection of only 20.14%, a huge surge in money supply. Why is this growth coming through in terms of money supply growth? It is due to Government expenditure. Again, it is back to the deficit. The impact Mr. President, is that the deficit I referred to earlier is causing growth in money supply. That growth in money supply is also fuelling inflation. That is not good. It is important to contain the budget deficit in the way that I explained. Let me turn to ….
[Cellphone rings.]
THE HON. DEPUTY PRESIDENT OF THE SENATE: Order. Hon. Members, I do not have to keep reminding you that when you bring cellphones into this House, you must switch them off or put them on silence. I hope this will not happen again.
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