RBZ in massive TB issuance

LIVINGSTONE MARUFU

The Reserve Bank of Zimbabwe (RBZ) has raised ZWG$5.9bn through Treasury Bill (TB) issuances and private placements, as the government intensifies domestic borrowing to fund its operations, manage liquidity, and meet escalating public wage demands.

This comes amid a worsening external debt crisis and Zimbabwe’s continued exclusion from international capital markets.

The central bank’s increasing reliance on local debt instruments underscores the government’s limited access to foreign credit, a situation largely driven by unresolved external arrears and prolonged international isolation.

RBZ Governor Dr. John Mushayavanhu said the TB issuances have played a critical role in managing liquidity and stabilising macroeconomic indicators during a volatile period.

“The Reserve Bank, acting as the government’s agent, managed to raise ZWG$5.9 bn through Treasury Bill auctions and private placements in 2024,” Mushayavanhu said. “These instruments remain key in managing liquidity and guiding interest rate policy.”

In May alone, the RBZ floated TBs worth ZWG$380m, offering an average yield of 20.2105%. The move reflects the central bank’s continued use of TBs as a monetary policy instrument to mop up excess liquidity and guide short-term interest rates.

“TB issuance is a key tool for the RBZ to manage the money supply and influence interest rates in the economy,” Mushayavanhu added. “The absorption or release of liquidity through TBs significantly affects financial system stability.”

While Treasury Bills are generally seen as safe and liquid investments in stable economies due to their sovereign guarantee, Zimbabwe’s TBs carry a contentious legacy. Past defaults on maturing instruments have eroded investor confidence and exposed structural weaknesses in the country’s public debt management.

During the peak of Zimbabwe’s fiscal crisis a few years ago, Treasury Bills became synonymous with unsustainable borrowing. Billions of Zimbabwean dollars were issued via the central bank’s overdraft facility, contributing to hyperinflation and widespread loss of trust in government-issued debt.

With Zimbabwe shut out of international capital markets—due to sanctions, ballooning external arrears, and persistent economic mismanagement—the government has been forced to depend heavily on domestic borrowing. This has led to recurrent budget deficits, financed largely through Treasury Bill issuances and RBZ overdrafts.

Economists warn that this approach has intensified inflationary pressures and worsened macroeconomic instability, creating a vicious cycle of debt dependency.

Now, new challenges are emerging. The government is struggling to meet obligations on maturing U.S. dollar-denominated TBs and is in the process of restructuring nearly US$1 billion in outstanding securities.

Zimbabwe’s legacy debt—estimated at US$21 billion—continues to exert immense pressure on the economy, restricting access to external development finance and constraining fiscal space.

According to the Zimbabwe Public Debt Management Office (ZPDMO), which falls under the Ministry of Finance and Economic Development led by Professor Mthuli Ncube, TBs worth US$177m matured in the fourth quarter of 2024. An additional US$738m is set to mature in 2025, bringing the total exposure under review to approximately US$915 m.

In response, the Treasury is working on a debt restructuring plan aimed at easing repayment pressures. Options on the table include extending maturity profiles, reducing coupon payments, or converting short-term TBs into longer-term debt instruments.

While these measures may provide temporary relief, economic analysts warn of deeper risks should restructuring efforts falter.

“A forced restructuring or default on TBs could lead to a broader loss of investor confidence,” one analyst told Business Times. “Future government debt may require significantly higher interest rates, raising the overall cost of borrowing.”

Zimbabwean banks—major holders of government paper—could face serious liquidity constraints if repayments are delayed or written down. Such disruptions could tighten credit supply to the private sector, dampen investment, and stall economic recovery.

The potential impact on institutional investors such as pension funds is also significant. Should these entities suffer losses, the knock-on effects could reverberate throughout the financial system—leading to credit contraction, limited lending capacity, and suppressed economic activity.

Analysts argue that Treasury Bill restructuring alone is insufficient to restore fiscal and economic stability. Instead, Zimbabwe needs a comprehensive reform package, including meaningful engagement with multilateral creditors and international financial institutions.

“Resolving the TB issue alone is insufficient,” said one economist. “The government must undertake broader economic reforms and engage institutions like the IMF and World Bank to negotiate debt relief and secure new financing.”

Ultimately, the road to debt sustainability and economic recovery, experts agree, will require renewed fiscal discipline, rebuilding market confidence in government securities, and unlocking access to concessional international funding.