THE Reserve Bank of Zimbabwe (RBZ) will on Tuesday return to the market to raise ZWL$300m through Treasury Bills (TBs) to fund government programmes.
The latest government commercial paper, the ninth since August, has a tenure of 272 days. Interest rate will be calculated on a yield basis, with other features including prescribed asset and liquidity asset status. The TBs will be tax exempted and accepted as collateral for overnight accommodation by the RBZ.
“The RBZ on behalf of the government of Zimbabwe hereby invites commercial banks, building societies, POSB and Infrastructure Development Bank of Zimbabwe to subscribe to government TBs tender amounting to ZWL$300m. The application must be for a minimum amount of ZWL$1 million,” RBZ said.
Government has over the past few months floated several TBs, underlying how government is crowding out the private sector on the money market.
Analysts said TBs have cash flow implications on government and can become a major source of economic vulnerabilities.
In stable economies, TBs are considered to be one of the safest and go-to investment destinations because they are generally considered risky free and liquid due to their backing by governments.
But, Zimbabwe government has been struggling to payoff maturing TBs, a situation which might lead to certain problems with TB holders as well as the economy and government’s ability to function properly.
A few years ago, the issuance of TBs had become highly controversial as government piled up billions in debt through the instrument as well as a central bank overdraft facility to bridge its budget deficit.
The new issuance of TBs comes at a time when government, since June this year, has been negotiating with market players with the view to roll over TBs worth ZWL$2.2bn maturing this year.
The possible default on payment of maturing stock of TBs by the Zimbabwe Government is due to limited financial resources, making the risk of buying the paper in the future high.
In the past few years, the government securities have been a form of money printing after government ditched its own currency in 2009 due to hyperinflationary pressures.
The commercial paper has been the biggest vehicle for State funding since 2012 to fund its programmes as a stop gap measure since it no longer had access to investments from international financial institutions due to its legacy debts.
Zimbabwe, once one of Africa’s most promising economies, suffered decades of decline under former president Robert Mugabe, has not been accessing fresh external capital due to its failure to clear debt arrears to international funders.