Home | Business | World Bank Speaks On Zim's Cash Crisis

World Bank Speaks On Zim's Cash Crisis

Font size: Decrease font Enlarge font

Harare - Fiscal imbalances combined with a large volume of domestic debt are at the core of Zimbabwe’s ongoing cash shortages, the World Bank said.

In a New Economic Update on Zimbabwe released on Wednesday, the World Bank said the central government’s fiscal cash deficit moved to 10% of GDP in 2016, up from 2.3% the previous year.

“The decision in 2016 to increase agriculture-related spending despite the decline in revenue and the continued growth of the wage bill substantially widened the fiscal deficit.The government’s fiscal position expanded by some 8 percentage points of GDP.”

“The deficit was largely financed from domestic financial markets as external arrears prevented Zimbabwe from gaining access to international capital markets,” said the World Bank adding that cash shortages are projected to depress Zimbabwe’s medium-term growth prospects as they limit investment for an ongoing structural transformation.

“The banking sector bore the brunt of the government’s financing needs, which led to liquidity shortages in the economy."

While the World Bank still expects the country’s growth rate to rebound to 2.8% in 2017, “growth rates for 2018/19 are being revised down to less than 1 percent, sharply negative in per capita income terms.”

Since 2014, the Zimbabwean government has issued Treasury Bills amounting to $4.41m to raise money to fund its expenditure as well as legacy debt issues. Of that amount about $1.1bn matured and has been liquidated leaving an outstanding amount of $3.31m as of the end of February 2017. Since then, more treasury bills have been issued to fund various projects.

On the 15th of June, media reports said government had issued treasury bills amounting to $50m to raise funds for irrigation equipment under its specialised Command agriculture programme.

Two weeks ago the International Monetary Fund (IMF) also criticised the Zimbabwean government’s plans to issue $600m worth of treasury bills to clear debts owed to the country’s sole electricity supplier, Zesa Holdings, by local authorities and state authorities, saying these entities should improve their operations and management to avoid debt pile up.

The IMF also said budgetary operations are crowding out the private sector, and the skewed expenditure profile towards wages is inhibiting investments in other priority sectors, particularly infrastructure.


  • Email to a friend Email to a friend
  • Print version Print version
  • Plain text Plain text

Tagged as:

No tags for this article

Rate this article