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More TBs coming: Central bank

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THE Reserve of Zimbabwe will soon issue new Treasury bills to ease liquidity constraints on the domestic market despite an initial low take-up by local banks, central bank governor Gideon Gono has said.

THE Reserve of Zimbabwe will soon issue new Treasury bills to ease liquidity constraints on the domestic market despite an initial low take-up by local banks, central bank governor Gideon Gono has said.

Report by Victoria Mtomba

This came amid plans by the apex bank to restore its lender of last resort function.

Treasury bills are short-dated instruments vital in determining the money market reference interest rate.

“Despite the rigorous lobbying by banks, participation in all the five auctions was very low. This notwithstanding, government will undertake additional Treasury bill auctions in 2013 on dates to be announced soon,” he said.

The bills were also issued to address the unequal distribution of liquidity and shortage of appropriate instruments for use as collateral in interbank trading.

The undercapitalised central bank has, since the adoption of multiple currencies in 2009, struggled to play its lender of last resort role. At least $150 million is required to shore up the RBZ.

Gono said there was need for the development of the money market and the lender of last resort to enable the smooth functioning of the money markets.

“To date, Treasury has been unable to provide the central bank with this fund despite several promises to do so. It is anticipated though, that this matter will be resolved soon,” he said.

Turning to financial sector reforms, the central bank governor said plans were advanced to develop the credit bureau framework as the central bank pushes to overcome the existence of asymmetric information between borrowers and lenders.

“The completion of the framework which is targeted for March 2013 will pave way for the commencement of operations by accredited bureaus,” Gono said.

Credit bureaus were also critical in reducing default rates through the development payment histories or “reputation collateral” used in securing more competitive loan rate, Gono added.