Gvt pays back RTGS$326 million of the local debt

Governemt says it has paid back at least RTGS$ 326 million of the local debt through the insuance of treasury bills and other cash flow management systems.

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Governemt says it has paid back at least RTGS$ 326 million of the local debt through the insuance of treasury bills and other cash flow management systems.

Presenting the state of the economy in the national assembly, Finance minister Mthuli Ncube said government has reduced the use of treasury bills to raise fresh money but now uses it to settle old debts that stood at $9.6 billion and now reduced to $9.2 billion.

“This represents a $326 million decrease in domestic debt. The decrease in the stock of debt was on account of debt repayments with a minimal Treasury Bill issuance of $28 million for cash flow management purposes,” Ncube told the national assembly.

Since president Emmerson Mnangagwa took over, the domestic debt shot up from $5.2 billion to $9.6 billion and this was financed through treasury bills.

Now under Mthuli, government has announced that it will reduce the use of treasury bills to finance state operations instead will cut expenditure and cause a surplus to the coffers.

Already, the finance minister announced that the budget balance for the period January to March 2019 was a surplus of $443, 1 million, against a target of $78,2 million, indicating a major shift in the management of central government finances from deficits to surpluses.

“As a result, since January 2019, no Treasury Bills nor the overdraft facility were utilised to finance the budget. The Treasury Bill issuances amounting to RTGS $180 million were for purposes of restructuring previous years’ maturing debt,” Mthuli said.

Government had last year announced that it would auction treasury bills issued to avoid abuse of the system, but Mthuli told the national assembly that the auction system was not yet in place

“With respect to implementation of the Treasury Bill Auction System, I envisage that this will now commence by the fourth quarter due to the recent measures announced in the Monetary Policy Statement. This will allow the markets to settle on the Treasury Bill market,” Mthuli said.

However, the external debt still stood at USD$8.2 billion as at March 31.

“The external debt stock stood at US$8,2 billion at the end of March 2019. The bulk of the external debt is in arrears at 71% of the total external debt, a reflection of the country’s challenges to create enough fiscal space that will allow the government to repay its external obligations as well as the foreign currency shortages bedeviling the economy,” Ncube lamented.

“External debt owed to bilateral creditors is at US$5,6 billion and constitutes the largest share of external debt. Multilateral creditors which are the IMF, World Bank, African Development Bank were owed US$2,6 billion as at 31 March, 2019. Government continues to engage various creditors for arrears clearance in which is an initiative which will also open up access to new development clients. What we have at the moment is a road map for arrears clearance which is also linked to the adoption of the staff monitored programme managed by the IMF. However, it is important to note that the country’s capacity to clear old arrears and meet obligations arising from new finances hinges on the strength of the economy which in turn requires implementation of reforms under the transitional stabilisation programme (TSP),” Ncube said.

The state has said lack of fresh capital has caused economic stagnation and the availability of external funds would ignite growth as well as capacity utilisation.