Mthuli plots US$250m infrastructure bond

BUSINESS WRITER

The government will issue an infrastructure bond to raise US$250m for the development and implementation of targeted priority infrastructure projects, Finance minister Mthuli Ncube has said.

It will also issue another bond to raise ZWL$2bn from the domestic market.

The Vaka-Yaka Zimbabwe Infrastructure Bonds come on the back of the realisation that relying solely on fiscal funding or loans to public entities, which it guarantees, is inadequate and unsustainable given the country’s fiscal position.

The Treasury has no fiscal space due to ballooning expenditure which is not matched by revenue.

“Infrastructure bond issues will crowd-in private sector finance, targeting projects with identifiable project cash flows that will be ringfenced towards repayment of the facilities on maturity,” Ncube said in the 2020 Zimbabwe Infrastructure Investment Programme document, adding that the government would provide fiscal resources to cover project cashflow shortfalls, including the necessary incentives.

He said success in the issuance of infrastructure bonds would also help in developing a vibrant domestic debt capital market, critical in mobilising private sector funding for the economy.

Projects to be funded through the bond issuance are Harare-Beitbridge Road upgrading project, National Railways of Zimbabwe recapitalisation programme, infrastructure for the new city at Hampden and urban renewal projects. It is estimated that the government requires between US$1.5bn and US$5bn yearly to address the infrastructure gap.

The African Development Bank estimates that infrastructure requirements in sectors such as transport, power, ICT, water and sanitation would be more than US$33.8bn over the next decade.

Ncube said the estimates were beyond the capacity of the national budget and government entities involved in service provision, thus resulting in funding gaps.

“Under-investment in new capacities and inadequate maintenance across all sectors during the past years has been prevalent, hence the rapid deterioration in services provision, with negative impacts on economic growth and social progress,” he said.

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