Government is expected to fund its debt by “printing money”, issuance of Treasury Bills or increasing the central bank overdraft facility which are the main ways it has used in the past.
However, American financial and economic literacy website, Investopedia, warns against this for countries that do not control their own monetary policy such is the case locally as government controls have caused the markets to run amok.
“Economists, who adhere to modern monetary theory (MMT) argue that sovereign nations capable of printing their own money cannot ever go bankrupt, because they can simply produce more fiat currency to service debts. However, this rule does not apply to countries that do not control their own monetary policies,” Investopedia said.
Government hopes by fixing the exchange rate at the current US$1:$25, this may allow for cheaper borrowing. But, as the Zimdollar continues its freefall which has already forced the government to bring back the greenback, the benefits of a fixed exchange rate may not be realised....The Zimbabwe Daily
TATIRA ZWINOIRA
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