Zimbabwe's domestic debt which stood at Z$590,5-billion in December last year has ballooned to Z$1,4-trillion in June. Latest figures available from the Reserve Bank of Zimbabwe on the country's foreign debt are for November when the figure stood at US$4 billion.
The domestic debt, which stood at Z$346-billion in December 2002 rose dramatically to Z$546-billion as at June 30 2003.
NMB Holdings Ltd this week said Treasury Bills, which were mainly two-year paper, account for 93% (Z$1,3-trillion) while government stock accounted for the balance of 7%.
The financial institution said government intended to further restructure the domestic debt during the second half of the year.
Analysts said the high interest rates would continue to be a burden on the fiscus. They said the increased borrowing had tied up a high percentage of the nation's savings.
They said the domestic debt would continue to soar due to the necessity to fund various imports such as electricity, grain and providing financial support for newly-resettled farmers.
When he took over as Zimbabwe's Reserve Bank governor, Gideon Gono said the current debt overhang had a negative impact on money supply numbers and, therefore, efforts to fight inflation.
He said Zimbabwe's treasury and monetary authorities and the private sector were engaged in active discussions over the idea of ring-fencing this debt and coming up with innovative instruments of dealing with the entire outstanding domestic debt.
Gono then proposed a zero-coupon bond where government issues a zero-coupon bond which investors purchase at a discount. He also proposed a weighting system to determine the discount factor for the said bond.
Another idea to try and stop the soaring domestic debt was that of converting the current domestic debt into foreign debt.
Gono said government with the help of the private sector would, on a bilateral basis, request friendly countries to issue foreign currency denominated bonds in international capital markets.
The foreign currency raised would then be sold to Zimbabwe's Reserve Bank and the local currency used to extinguish domestic debt while the foreign currency with the Reserve Bank could then be used to repay part of the foreign debt or meet the country's import requirements.
It, however, seems none of these proposals have begun to bear fruit if they have been put in motion. Zimbabwe's balance of payments position has remained weak, largely as a result of poor export performance and continuing importer demand.
Information provided by Zimbabwe Independent.