The Agricultural Marketing Authority (AMA) and CBZ Bank agro-bills to raise $50 million for agricultural production failed to raise the targeted amount after just over a third of the total bids were allotted.
A total of $17,7 million was raised after $31,9 million, which showed bills were under-subscribed.
A statement from the bank indicated the highest rate tendered for the 360 days was 19,75% while the minimum was 10%.
The average weighted rate of allotment was 11,27%. Bills are money market instruments used to raise funding.
The government plans to raise $100 million 360-day agro-bills to finance agricultural activities.
AMA and CBZ are expected to open a second tender of bills on December 21 and close on December 23 2011 with the $50 million issue guaranteed by CBZ Bank.
The first $50 million issue, fully guaranteed by the government opened on December 9 and closed on December 15.
CBZ also floated bills to raise $20 million for soyabean production with a tenor of $270 days and they were also under-subscribed managing to raise $4,5 million.
The agricultural sector is facing challenges that include lack of capital as well as the absence of title deeds that can be used as collateral to obtain loans from banks.
In his 2012 National Budget statement, Finance minister Tendai Biti said: “Treasury is mindful of the need to put sweeteners to the bills to ensure full subscription.
“In this regard, the government is ready to grant special features, which include prescribed asset status, liquid asset status and tax exemptions.”
He said the government would be engaging the banking sector with a view of ensuring the special features of agro-bills cascade to farmers to the extent credit to farmers will be at affordable interest rates of around 10%.
The agricultural sector output is expected to increase next year with tobacco, maize, cotton, soyabeans and poultry being the drivers.