Last week, Zimbabwe’s energy and power development permanent secretary Partson Mbiriri disclosed that government will release Treasury Bills worth $600 million to pay off debts owed to ZESA by local authorities and state enterprises. Read more…
In response to this, the International Monetary Fund (IMF) has cautioned against the issuance of the bills, according to the Herald.
Media further quoted correspondence with FinX an online-based service, whereby the IMF said: “The weak financial performance of SOEs (State-owned enterprises) in Zimbabwe constitutes a drain on the government budget and a significant drag on growth.
“Intra-public sector arrears complicate efforts to improve governance and financial discipline. Making progress requires ending the continuous recapitalisations of SOEs by the government.”
Treasury Bills deal with existing arrears
IMF added: “The need for the government to recapitalise SOEs or clear arrears becomes particularly problematic when the fiscal deficit is significant and domestic debt is on a sharp upward trend.
“So while dealing with existing arrears is important, it should take place in the context of broader reforms, such as developing an electricity tariff structure that allows ZESA to return to cost-recovery, and improving the governance and oversight of the SOEs.
“SOEs should enhance their management and operations and prevent the build-up of future liabilities.”
Cost-recovery tariff structure
Meanwhile, energy and power development minister, Samuel Undenge, has made a call for a cost-recovery tariff structure, which implies a power tariff hike.
Speaking to the media, Undenge said: “The revenue which ZESA is receiving is below the cost of its operations and there is that constraint. I think you remember at one time I called for a tariff increase and at that time it was not taken.”
“When you compare to other countries like South Africa, the tariffs are increased on an annual basis but we don’t have that in our pricing system so we need to address that,” he said.
Minister Undenge said ZESA has not known a tariff increase for the past six years.
However, industry has been arguing that the power utility should actually lower down its tariffs by fostering competitive measures in the operations, media stated.