Harare – Zim Treasury has announced that it repaid $75.1million worth of Treasury bills in the month of February which loosely translate to 1% of total TBs outstanding as at December 2018.
Treasury bills are a form of sovereign debt security issued by government as part of an expansionary policy measure.
With respect to Zimbabwe, government has sought to issue TBs in order to support budgetary financing as well as other objectives such as boosting the economy’s productive sector.
It is however against the background of perennial budget deficits that the Zim government has amassed a massive $7.4 million in outstanding TBs over the last 5 years.
In 2018, he stock of local debt reached a climax of $10 billion largely composed of Treasury Bills.
This debt issuance implied a debt quicker growth in money supply in the exchange economy. Annual broad money supply as closed 2018 close to 30%.
Notably this growth meant a fictitious money was slowly taking over the system in replacement of the US dollar which by then was the official currency of Zimbabwe. As the stock of treasury bills grew so did money supply and the ratio of “fictitious” money then pegged at 1:1 to the USD.
The challenges however were that the USD became more and more dwarfed in volume by the RTGS money thus pushing demand for USD higher relative to the RTGS. This discrepancy resulted in tiered pricing following the relative strength of a curency.
The market adjusted for goods’ prices in bond note which was seen as a proxy to local money together with the wired RTGS money.
By design the price of goods in USD which was the benchmark remained stable and in some instances even lowered while prices in alternative currencies these being the bond note and RTGS were increased at an implied exchange rate across a significant portion of the market resulting in inflation.
It is against this background, that government has sought to undertake economic restructuring under the auspices of the 2 year TSP with consolidation as a key pillar.
Part of the strategy is to lower the gearing position by clearing debt. Total debt for the country now runs close to $18 billion split in 2 equal halves between local and fleeing debt.
The 2019 budget has only set aside $300 million for purposes of debt clearance which equates to just 1.7% of total debt, a lower ratio given the much touted debt clearance ambition.
In a bid to lower the stock of money supply government has however sought other means such as higher taxation and issuance of other bonds such as the savings bonds.
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