Government plans to raise $50 million for the rehabilitation of the country’s crumbling infrastructure through issuance of Infrastructure Development Bonds.
The bonds — to be issued by the Infrastructure Development Bank of Zimbabwe and having a five-year tenor while attracting a 10% interest rate per annum — are guaranteed by the government.
Special features of the bonds include prescribed asset and liquid asset status.
Liquid assets are accounts or securities that can be easily converted to cash at little or no loss of value status, while prescribed assets allow pension funds and insurance companies to invest in government portfolios.
The bonds will be exempt from tax, tradeable and carry the lender of last resort security status.
Announcing a cocktail of measures aimed at
stabilising the financial sector last week, Finance minister Tendai Biti said the large infrastructure funding requirements could not be met from the current levels of fiscal revenues.
He said this was more so given the disproportionate demands on the government arising from both discretionary and non-discretionary recurrent expenditures.
“However, the state of some of our infrastructural facilities requires or calls for immediate interventions,” Biti said.
“Hence, notwithstanding the prevailing challenges in the financial system, Treasury will be issuing Infrastructure Development Bonds to complement Budget resources set aside for the financing of the rehabilitation of infrastructure.”
A Sinking Fund will also be established to facilitate interest and principal payments.
In its Infrastructure and Growth in Zimbabwe report last year, the African Development Bank (AfDB) said the country required $14,2 billion in the next 10 years to rehabilitate infrastructure.
The report noted that Zimbabwe had fallen behind its regional counterparts in terms of information communication technology service and broadband penetration.
AfDB said 60% of the country’s road network of approximately 90 000 km could be classified as being between fair and good.
At least 12 800km was classified as being in poor condition requiring complete rehabilitation.