BUSINESS REPORTER
Zimbabwe is set to borrow ZWL$14.45bn from the domestic market between July and September to finance government programmes, the Zimbabwe Public Debt Management Office (ZPDMO) has said, despite the Treasury facing refinancing risks as investors shun long term government securities.
According to a schedule released yesterday, Zimbabwe borrowed ZWL$600m on July 1 through the issuance of 365-day government paper. On July 1, the government borrowed ZWL$820m after issuing a 270-day paper.
It will be back in the market today seeking ZWL$1.250bn with a 270-day government paper.
It will borrow ZWL$800m, ZWL$600m, ZWL$950m and ZWL$750m through the issuance of securities with tenure of 270 days on August 12, August 26, September 9 and September 23 respectively.
It will raise ZWL$1bn on July 22 and August 5, ZWL$500m on August 19, ZWL$1.250bn on September 2 and ZWL$280m on September 16 through issuance of 365-day government securities.
The government will borrow ZWL$800m on July 29, ZWL$1.550bn on August 12 and ZWL$2.3bn on September 30 via the issuance of 730-day government securities.
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. Since 2018, Zimbabwe has been issuing government securities through the auction system. The plan was disrupted last year when the government was forced to use the private placement on its securities due to the Covid-19-induced lockdowns.
In stable economies, Treasury Bills and bonds are some of the safest and go-to investment destinations as they are generally considered risk-free and liquid due to their backing by governments. However, the commercial paper issued by the Zimbabwe government, had previously become the source of economic vulnerabilities.
