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Chinamasa says high Government borrowings pose financial risks

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The country’s budget deficit will worsern to an estimated year end level of $1 billion as revenue collections continue to underperform, Finance Minister Patrick Chinamasa has said.

This comes after underperformance of revenues against over-expenditures resulted in a cumulative budget deficit of $623.2 million in the six months to June, far above the full year target of $150 million.

“Failure to contain the budget deficit in the shortest possible time will worsen the deficit to an estimated year end level of over $1 billion,” said Minister Chinamasa while presenting the mid term fiscal policy review.

 

He said that to finance the budget deficit the Government had turned to TBs with around $726.1 million having been issued by the end of June.

However, Minister Chinamasa admitted that lack of capacity to service domestic debt had also seen roll overs which are posing some financial risks on domestic financial institutions. “This situation unfortunately is not tenable and is undermining the stability of the financial sector and overall economy.

“Further to this Government borrowing is also crowding out lending to the private sector and hence stifling new domestic investment and growth.”

He admitted that the situation was creating a vicious cycle where excessive Government borrowing would lead to poor performance of the private sector and in turn, diminished future tax revenues

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