Harare – Finance and Economic Development Minister, Mthuli Ncube vowed on Thursday to strictly control government expenditure next year to keep the budget deficit in check, and in accordance with acceptable international benchmarks.
Presenting a ZW$4.2 trillion 2023 national budget in parliament, he said revenue collections next year were projected at ZWL$3.9 trillion, expenditure at ZWL$4.2 trillion, giving a deficit of ZWL$336.9 billion.
Loan repayments amounting to ZWL$248.6 billion, would result in a total financing requirement of ZWL$585.5 billion.
Ncube said the deficit would be financed through bond and treasury bill issuance, external loan disbursements, and Special Drawing Rights draw downs.
“The level of the budget deficit is guided by the need to ensure that public debt remains sustainable and within the Public Debt Management Act target of 70 percent of GDP and SADC macroeconomic convergence benchmark of budget deficit of not more than 3 percent of GDP,” he said.
“The overall deficit of ZWL$336.9 billion (1.5 percent of GDP) and net loan repayments amounting to ZWL$248.6 billion, results in a total financing requirement of ZWL$585.5 billion.”
The funding options include a bond issuance on the Victoria Falls Stock Exchange amounting to ZWL$95.2 billion, external loan disbursement amounting to ZWL$398.2 billion equivalent, and Treasury bill issuances of ZWL$82.2 billion.
“Treasury bond issuances of US$100 million will be issued in tranches through the Victoria Falls Securities Exchange (VFEX), specifically for infrastructure development targeting roads rehabilitation and irrigation infrastructure,” he said.
“The external loan disbursement of ZWL$398.2 billion comprises of an expected loan facility of US$400 million from Afreximbank still undergoing approval processes and existing loan disbursements from OFID, IFAD and BADEA.”
Ncube also set the annual borrowing limit in line with the Constitution and the Public Debt Management Act.
“In this regard, the overall annual borrowing limit has been set at 5.75 percent of GDP for the year 2023, informed by the level of the budget deficit and the government’s capacity as guided by Public Debt Management Act and commitments,” he said.
“The limits are as follows: Central Government borrowing for budget support, 3 percent of GDP (for budget financing and amortisation of loans and securities), State-Owned Enterprises, including on-lending from Central government, 2 percent of GDP (0.5 percent for guarantees, 1 percent for on-lending and 0.5 percent borrowing power authorities), Local Authorities, 0.25 percent of GDP (0.125 percent guarantees and 0.125 percent borrowing power authorities).
“The borrowing is limited to 10 percent of their respective previous year’s revenues; and guarantees to the private sector, 0.5 percent of GDP. Guarantees to the private sector are being considered under the various Special Drawing Rights facilities such as the Horticulture and Industry Re-tooling facilities, with all requests subjected to mandatory due diligence assessment procedures and gazetting.” – New Ziana
