ON THE CLIFF’S EDGE
Is Zimbabwe's history repeating itself?
While evidence has emerged that Robert Mugabe’s government is printing an oversupply of money, the central bank says exports will save the day. The IMF believes the current deficit financing model is unsustainable
Is Zimbabwe’s government creating money — electronic and physical — to escape a burgeoning fiscal deficit? A clear confirmation of money creation could not have come at a more opportune time. The newly appointed International Monetary Fund (IMF) mission chief for Zimbabwe, Gene Leon, told the Financial Mail last month that between December 2015 and May 2017, Zimbabwe’s money supply jumped dramatically, thanks to an overdraft created by the central bank to allow government to finance a fiscal deficit. Finance minister Patrick Chinamasa says Zimbabwe had a US$900m fiscal deficit in the 2016 financial year. He says this was financed through treasury bills issuance. Leon said government debt is now US$4bn, up from $2bn last year, as a result of the issuance of treasury bills. Banks’ balance sheets are awash with government paper. "The increase in money supply is created by the overdraft from the central bank to government that is used to finance the large fiscal deficit," he said. "The ...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.