The government’s high domestic debt has been blamed for cash shortages. Through uncontrolled spending the government’s domestic has blown out of proportion in the last three years. In 2013 the domestic debt stood at $500 million. However, this figure has shot up to $3, 7 billion in October 2016.
The government has been borrowing heavily from the domestic market issuing Treasury Bills. In October the World Bank said:
Banks’ purchases of TBs and other public sector borrowing may have contributed to liquidity shortages and crowded out bank lending to the private sector. Faced with cash shortages, banks were unable to honour demand deposits.
Without a fiscal adjustment and/or access to external credit through arrears clearance, government will have to borrow from banks. This is likely to result in an accumulation of public debt, diminishing investor confidence and limiting Zimbabwe’s growth prospects.
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