By MacDonald Dzirutwe

 

HARARE, 09 Sept. - (ANA) - Zimbabwean business leaders told President Robert Mugabe on Thursday that his government’s expanding fiscal deficit was unsustainable and that financing it through local borrowing could destabilise the banking sector.

 

At the first such meeting in 10 years, executives from the mining, manufacturing, banking and farming sectors and representatives of foreign airlines told Mugabe and his cabinet ministers they must exercise fiscal discipline.

 

“The current levels of the fiscal deficit and the mode of financing, against diminished fiscal revenue sources, is measurably unsustainable,” said Charles Msipa, who represented the business leaders at the meeting in Harare.

 

“This scenario invariably leads to an unsustainable domestic debt build up, with significant adverse implications on the banking sector stability,” Msipa said.

 

Mugabe did not directly respond, but said there should be more meetings between his cabinet and business leaders.

 

In July, Finance Minister Patrick Chinamasa said the budget deficit had risen to $1.4 billion in 2016, worse than previously estimated and equivalent to 10 percent of national output.

 

Zimbabwe has not been able to borrow on international financial markets since 1999 after defaulting on repayments to the International Monetary Fund and other foreign lenders and must rely on domestic taxes to fund its $4 billion budget.

 

The government is borrowing from banks by issuing Treasury Bills, which analysts say is a major cause of liquidity shortages in the economy.

 

The central bank says the total stock of Treasury Bills in the market is $2.5 billion, but bankers and financial analysts say the figure is much higher.

 

Msipa said foreign currency shortages meant businesses were struggling to pay for imports, echoing a warning by a retailers’ association this week that problems importing could lead to shortages of basic goods.

 

Last month, the central bank ordered platinum and chrome miners, the country’s main foreign currency earners, to surrender 80 percent of their export earnings to it -- up from 50 percent -- to contain a crippling dollar note shortage. - (ANA) -

 

 

AB/ANA/ 09 September 2017 - - -