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HARARE, June 8 (Reuters) - Zimbabwe's domestic debt rose 40 percent to $4 billion during the year to March while the budget deficit was $230 million in the first quarter of this year, the national treasury said in a report on Thursday.
The southern African nation has had to rely on domestic taxes and borrowings to fund its national budget since international institutions stopped lending to President Robert Mugabe's government, which owes more than $7 billion in arrears.
The treasury said in a January-March report that the government's domestic borrowings stood at $4.034 billion at the end of the first quarter, up 40.2 percent from the prior year.
Mugabe's government has struggled to pay its workers due to a financial squeeze and earlier this year said it would borrow $180 million locally to pay outstanding bonuses for 2016 after civil servants threatened to go on strike.
The budget deficit stood at $230 million during the first quarter after the government spent $1.1 billion against revenue of $869 million. More than 60 percent of the revenue was used to pay state wages.
The treasury however said it expected economic growth of 3.7 percent this year, over double its previous forecast of 1.7 percent, on the back of improved performances in agriculture and mining.
Output of the staple maize is forecast at 2.1 million tonnes this year, from 511,000 tonnes in 2016, when Zimbabwe was hit by a devastating drought that left more than 4 million people in need of food aid.
Earnings from mining, the biggest foreign currency earner, are forecast to reach $3 billion this year due to higher commodity prices, the treasury said. (Reporting by MacDonald Dzirutwe; Editing by Ed Stoddard)