THE Reserve Bank of Zimbabwe (RBZ) finally accepted bids for the 91-day Treasury Bill (TB) on Friday bringing to an end confusion surrounding the auction of the paper, as the apex bank had twice rejected bids without giving reasons.
Report by Ndamu Sandu
Total bids on Friday amounted to $11,1 million and $9,85 million was allotted. The paper intended to raise $15 million and bids of $1,25 million were rejected while the average coupon (interest) rate was 8,51%.
TBs are short-term negotiable instruments issued by the government through the central bank to finance government short-term requirements. TBs are considered as less risky of all Treasury products, as they were guaranteed by the government.
Friday’s successful auctioning of the securities came after banks’ bids for the TBs worth $11,2 million had been rejected at last Wednesday’s auction.
Since the use of multi-currencies in 2009, no TBs had been issued by government.
The absence of TBs had been blamed for the non-functioning of the interbank market.
Finance minister Tendai Biti in Bulawayo last Thursday, took a swipe at some banks accusing them of giving the government headaches. “These banks, Barclays Bank, Stanbic Bank and Standard Chartered have attitude problems which I won’t say much of, but we will also act on that,” Biti said while addressing a Budget consultation meeting.
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In a normal economy, all banks work in unison, making it possible for the financial system in the country to operate efficiently. Banks with excess liquidity assist those in deficit positions using TBs as security. In addition, the central bank, as lender of last resort, accommodates banks in deficit by offering them overnight funds secured by TBs.
Before the return of TBs, any bank facing liquidity mismatches had to solve the problem on its own, as the said institution cannot approach other players because there was no security to be lodged.
This had been compounded by the fact that RBZ does not have adequate funding to play its lender of last resort role. Banks had also argued that the absence of a tradable paper was inhibiting efforts to distribute liquidity.
As a result banks had to hold large amounts in Real Time Gross Settlement (RTGS) balances.
According to the RBZ, surpluses in the form of idle RTGS balances rose to $300 million in June from $120 million in January.
