Harare – The Reserve Bank of Zimbabwe (RBZ), on behalf of Government issued ZWL$300 million treasury bills on Monday, 11 November 2019.
In a statement, RBZ invited commercial banks, building societies, People’s Own Service Bank (POSB) and the Infrastructure Development Bank of Zimbabwe (IDBZ) to subscribe to TBs with a 182-day tenure.
The TBs were offered at a minimum amount of ZWL$1 million.
“The number of bids per investor is restricted to two and copies of the application forms are available from RBZ local dealers, 80 Samora Machel Avenue, Harare,” the central bank said.
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 government amassed a massive $7.4 million in outstanding TBs over the last 5 years.
Notably in 2018, the stock of local debt reached a climax of $10 billion largely composed of Treasury Bills.
In August 2019, Government went back into the treasury bills auction market aiming to raise about ZWL$640 million to finance various projects.
After a promising start, recording oversubscriptions of the sovereign paper, the project has since been met with some potholes recording under subscriptions for ZWL$150 million TBs issued in the earlier week of October 2019 which only managed to raise ZWL$72 million.
According to Equity Axis’ lead analyst, Respect Gwenzi, given rising inflation, rising interest rates, high government domestic debt and falling real tax revenues, the government may struggle to raise cheap money in the domestic market.
He highlighted that most banks have been reducing their exposure to the private sector opting to invest in sovereign instruments with loans to deposit ratio averaging below 40% down from the 80% in 2013.
“Lack of quality borrowing clients in a difficult macro-economic environment also dissuaded banks to lend to the private sector as the level of risk could not match with the prevailing interest rates,” Mr Gwenzi said.
“Limited competing investable assets in the economy, may work as the only positive driving factor for TBs bids,” he added.
Equity Axis News
Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment. He can be contacted through the following email links, firstname.lastname@example.org and email@example.com.