INTERNATIONAL - Zimbabwe has opened its first public auction for treasury bills in almost seven years to raise ZWL30million (R1.77m) to finance government programmes as Finance Minister Mthuli Ncube readies a mid-term budget review statement today.
Ncube has been battling to prop up Zimbabwe’s economy and there is resistance to austerity measures he is implementing to right the country’s economy.
While the previous administration of former leader, Robert Mugabe, borrowed excessively, Ncube has resisted the urge to borrow more and has been reviving capital and investment markets through issuance of bonds and now, public treasury bills.
In line with this, the Reserve Bank of Zimbabwe yesterday opened the window for the ZWL30 million treasury bills offer, explaining that the interest rate policy would be on an “open tender on a yield basis” with allotment and payment closing today. It stated that the purpose of the public treasury bills issuance was “to finance government programnes”, especially at a time when treasury has been squeezing fiscal spaces to contain government expenditure. The Zimbabwe dollar is trading at an exchange rate of 1:9 against the greenback on the formal interbank market. Minimum applications for the treasury bills tender have been set at ZWL1 million while “the number of bids per investor are restricted to two”.
Special features for the auction include liquid asset status, tax exemptions while the instruments will be “acceptable as collateral for overnight accommodation” by the central bank. Zimbabwe has been battling a severe financial crisis that has afflicted foreign and local companies, impacting on remittances of dividends and capital gains from the country.
Financial experts at the World Bank say public sector borrowings and excessive issuance of treasury bills in the past had “contributed to liquidity shortages” and “crowded out bank lending to the private” sector. Other analysts say much of the almost ZWL9 billion Zimbabwe is carrying in domestic debt was contracted between 2016 and 2018. Treasury permanent secretary, George Guvamatanga, said earlier this month that the government was set to issue an infrastructure bond for road infrastructure development.