Zimbabwean Debt Situation

2 and Z$27-trillion on June 9.
The country’s debt has continued to skyrocket against a background of deteriorating macroeconomic fundamentals and the socio-economic situation. The central bank’s overnight accommodation recently stood at 850%, the inter-bank rate at 693,3%, and treasury bill yields at 510%. The situation is worsened by the fact that Zimbabwe is isolated internationally and cannot get foreign direct investment, donor
funds, or debt cancellation — all crucial to economic growth.
The domestic debt has become a problem not only because of its massive size, but also the rate at which it is mounting. The other problem is that a large portion of the debt is in short-term bonds that attract high real interest rates, and this creates a vicious circle.
The government recently printed money on a massive scale to pay an army of restless soldiers and civil servants. This brought the government wage bill to more than 40% of the budget. The fiscal and monetary consequences of the debt are enormous — it always leaves the government facing bankruptcy, even though Mugabe holds the view that a government cannot become broke because it can always print money. While this is true in the most simplistic of terms, it betrays economic ignorance.

Foreign debt soars to US$3.9 billion
HARARE – Zimbabwe’s foreign debt has ballooned to US$3.9 billion with internal debt rising to US$208 million, according to the latest figures released by the central bank on Thursday.
The Reserve Bank of Zimbabwe (RBZ) says foreign debt had risen to US$3.9 billion as an economic crisis that began six years ago showed no signs of abetting with record inflation close to 1 200 percent, the highest in the world.
“The revenue and expenditure developments resulted in a budget deficit of Z$1 586-billion for the month [January] under review,” the bank said in its Monthly Review bulletin for February.
Zimbabwe’s economy has been on a free-fall since the withdrawal of balance-of-payments support by the International Monetary Fund (IMF) and the World Bank in 1999 after President Robert Mugabe differed with the Bretton Woods institutions over monetary policy and other governance issues.
Zimbabwe has struggled to service its debts to the IMF over the past six years with the Harare authorities only averting expulsion from the international lending institution after making surprise payments last August. – ZimOnline