May 15, 2017 / 5:26 PM / in 3 years

Zimbabwe's high state spending may deepen cash crunch: IMF

A photographer takes pictures through a glass carrying the International Monetary Fund (IMF) logo during a news conference in Bucharest, file. REUTERS/Bogdan Cristel

HARARE (Reuters) - Zimbabwe’s cash shortages could worsen and inflation may be triggered if President Robert Mugabe’s government doesn’t temper excessive state spending, the International Monetary Fund said on Monday.

The southern African nation has been grappling with cash shortages since last year and the introduction of a “bond note” currency in November has failed to meet demand.

Without balance of payment support from international financial institutions, President Robert Mugabe’s government has relied on taxes and the domestic market for borrowing, sending the budget deficit spiralling in 2016. [nL5N1E34HU]

“Excessive government spending, if continued, could exacerbate the cash scarcity, further jeopardize the health of the external and financial sectors, and, ultimately, fuel inflation,” the IMF said after a country visit.

Official data on Monday showed inflation rising to 0.48 percent in April, the second month consumer prices have increased following more than two years of deflation. [nJ8N1GN017]

Reporting by MacDonald Dzirutwe; Editing by Joe Brock

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