BUSINESS REPORTER
Zimbabwe has issued the first 2-year commercial paper as it seeks to raise ZWL$1.550bn from the domestic market to finance its programmes despite investors shunning long term government securities.
In a notice, the Reserve Bank of Zimbabwe is inviting investors such as pension and provident funds, insurance companies, mutual funds, commercial banks and interested institutions, among others to subscribe to the 2-year Government of Zimbabwe Treasury bond.
The bond attracts a coupon rate of 18% per annum paid semi-annually on February 20 and August 20 until maturity of the bond.
The offer opened yesterday and closes on August 18.
The Zimbabwe Public Debt Management Office (ZPDMO) said last month that Zimbabwe would borrow ZWL$14.45bn from the domestic market between July and September to finance government programmes.
The government’s plans to raise money from the domestic market come as ZPDMO said the bulk of the issued government securities mature this year and 2022.
As at the end of 2020, the domestic debt was ZWL$16.70bn as the government turned to the domestic market to plug budgetary gaps.
According to the annual public debt bulletin by ZPDMO, the domestic debt maturity profile shows that about ZWL$4.1bn (25% of total domestic debt) and ZWL$4.6bn (28% of total domestic debt) will mature in 2021 and 2022 respectively, before receding to ZWL$700m in 2023.
“The concentration of the maturities in 2021 and 2022 is attributable to the preferences of investors for short-to-medium-term instruments in government securities, as they desire to hedge against inflation, which in turn translates into Treasury’s refinancing risk,” the office said.
The domestic financial and capital markets remain the major source of financing for the Treasury as it has no access to external financing due to the continued accumulation of external debt arrears.
