Low confidence, inflation threaten savings bonds


The savings bonds introduced by the Reserve Bank of Zimbabwe (RBZ) are not appealing to institutional investors due to lack of confidence in the fixed income instrument and inflation fears, a survey by an association of chartered financial analysts has said.


In his mid-term monetary policy statement review, RBZ governor, John Mangudya announced the introduction of savings bonds to nurture a culture of saving and building national wealth. The minimum investment is $100, attracting an interest of 7% per annum.

In its analysis of economic indicators, the Investments Professionals Association of Zimbabwe (Ipaz) said 70,37% of its members are of the view that the bonds are not appealing to institutional investors mostly because of lack of confidence in the bonds and the RBZ as an institution.

“Moreover fixed income instruments are out of favour due to inflationary fears. (A total of) 29,63% however, believed the savings bonds are appealing to institutional investors,” Ipaz said.

Ipaz said 55,55% of the members surveyed said RBZ savings bonds would not impact investment rates largely because not many institutional investors consider the RBZ as a policy guide on rates, as they do not have the instruments to control monetary policy.

The survey showed the bonds would not have an impact on liquidity.

“On the effectiveness of the RBZ bonds in mopping liquidity on RTGS [real time gross settlement], 66,67% said there is no short to medium term impact on liquidity because the liquidity problem is systemic and the RBZ cannot address liquidity but can only manipulate its extent. (A total of) 33,33% said liquidity will tighten,” Ipaz said.

The survey said 53,85% said it was better for RBZ to onward lend savings bonds proceeds to central government, as opposed to the current practice, because it will introduce discipline, as the available resources will be limited.

“(A total of) 46,15% said it is not better for RBZ to onward lend bonds to central government because the effect is the same with the issuing of Treasury Bills,” Ipaz said.

RBZ sees the savings bonds as a catalyst in the empowerment of the banking public by providing an investment instrument with high yielding returns, as well as offering safe and secure investment.

The bonds enjoy tax free on interest earned.

Banks have been failing to attract long term deposits due to low disposable incomes and low interests rates offered. While deposits have been on the increase, the bulk of it has been transitory in nature. The absence of long-term deposits has affected banks’ capacity to offer long tenure loans.

Ipaz is an association of chartered financial analyst charterholders in the country and those in other countries, who have Zimbabwean links. For this initial survey, 28 Ipaz members participated.


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