Zimbabwe’s central bank said on Friday its first Treasury Bill auction in seven years, aimed at raising $3.25 million, was oversubscribed more than four times as the government started open market borrowing to enhance transparency on its domestic debt.
Finance Minister Mthuli Ncube told parliament on Thursday that the government’s domestic debt was now 8.8 billion Zimbabwe dollars, down from 9.5 billion last year.
The economy is expected to contract this year due to a drought, foreign currency shortages and severe power cuts, Ncube said, as he announced a threefold hike in electricity tariffs that will fuel already crippling inflation.
The central bank received 132.7 million Zimbabwe dollars ($3.25 million) in bids for its 91-day Treasury Bill and allotted 30 million Zimbabwe dollars at an average interest rate of 15.6%.
The government had relied on a central bank overdraft and private Treasury Bill sales to fund the budget, which analysts said was opaque and helped drive the deficit to 11.7% of GDP last year.
Ncube said the budget deficit would come down to 5% of GDP this year. He announced a raft of measures to raise money including vehicle licence and toll fees, which he said were necessary after the government removed an official peg to the U.S. dollar in February.