Market appetite for TBs wanes

The Reserve Bank of Zimbabwe (RBZ)’s latest issue of Treasury Bills (TBs) through public auction only got a measly 10% of the required ZWL$300 million to finance government programmes as appetite for the commercial
paper weans.

Government has been vigorously going into the market to raise funds for its programmes, crowding out the productive sector. But, fears have been growing that government might fail to honour TBs when they mature.

Since June this year, government has been negotiating with players in the market to roll over TBs worth ZWL$2,2bn maturing this year as central
government is under pressure to raise funds to meet a budget deficit estimated at 1,5 percent of gross domestic product in 2020.

This resulted in the Reserve Bank of Zimbabwe shooting down the offers saying the central bank wanted to “maintain value”. Finance and Economic Development Minister, Mthuli Ncube, yesterday vowed to come back to the market with TBs despite rejecting measly offers this Tuesday. Ncube said the offers were rejected because of pricing issues.

“Depending on the pricing, we can accept or reject,” Ncube said.
Ncube added: “Obviously we have a target pricing and we are also trying to build a yield curve and we also want to make sure the pricing is not punitive to those who have to service which is government.

“So remember we are borrowing on behalf of the people so the lower the interest rates the better so that tax payers don’t have to carry a huge burden. It’s normal for this kind of thing as part of the auction system for TBs globally.

“We will certainly be back as I said, this is normal. There is nothing abnormal about it.” Ncube said he is overally pleased with how the auction
system has taken off given the performance of the overnight rates and inflation.

He described the TBs as a huge success in a difficult economic environment. Meanwhile Ncube said the country purchased US$1million insurance premium from African Risky Capacity Limited (Arc) which will unlock US$5,3 million in the event of extreme weather conditions.

The insurance premium will be paid by year end. The move is expected to go a long way in building resources for cash transfers to support those who are impacted negatively by the drought situation.

In the same realm, Ncube said, the World Food Program will also be purchasing insurance from ARC as well also with a view to accessing
resources from the insurance company for use in Zimbabwe to support the vulnerable between now and June next year.

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