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Don't expect Treasury bills to plug Zim budget deficit - Chinamasa

Harare - Zimbabwean Finance Minister Patrick Chinamasa on Thursday said the country needed to move away from issuing Treasury bills as a measure to plug the $1.1bn budget deficit it has notched up this year.

Chinamasa, who presented Zimbabwe's 2017 budget, said the country's economy is struggling with under-production across all sectors.  

He however said the economy's performance was dragged down by drought and low commodity prices and recovery hinged on prospects for good rains, addressing policy consistency challenges and fixing cash and liquidity problems.

"The economy continues to be affected by underperformance across all sectors, low production, low incomes and high unemployment," he said.

Zimbabwe's economy has also become mostly informal and this has affected the remaining formal businesses, which have often complained of higher taxation. In line with poor performance across all sectors, the economy is now projected to grow by a paltry 0.6% in 2016.

Civil servants' salaries and bonus payments have also ballooned Zimbabwe's public expenditure bill, with government expenditure amounting to $4.4bn in 2016. Budget performance was at about $3.2bn.

This has left the country with a deficit of over $1bn. Employment costs between January and October 2016 surged to $2.6bn, despite calls from the International Monetary Fund for the government to curb excessive public service spending.

"People should move away from expectations that Treasury bills can be used... to meet budget deficits," said Chinamasa.

For 2017, the government has set revenue collections at $3.7bn against expected expenditure of about $4.1bn. Expectations are that the deficit will be funded from donor funding, Treasury bills and other sources such as grants.

However, Zimbabwe is unable to access much advancements because of its arrears to multilateral financiers, although it had settled some of the dues owed to the IMF.

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