THE Reserve Bank of Zimbabwe (RBZ) is seeking to raise $30 million through a public auction of Treasury Bills (TBs) to finance government programmes.
BY FIDELITY MHLANGA
This is the first public Treasury Bill sale in seven years after a test run last month to gauge market appetite for government paper. The apex bank has invited banks and building societies to subscribe to the sovereign paper with a 91-day tenure with successful bids to be alloted today.
“The Reserve Bank of Zimbabwe (RBZ) hereby invites commercial banks and building societies registered in Zimbabwe, including the POSB and Infrastructure Development Bank of Zimbabwe (IDBZ to subscribe to Treasury Bills amounting to thirty million dollars (ZWL$30 000 000),” the Central bank said in a statement.
Applications must be for a minimum amount of $1 million, with the number of bids per investor restricted to two.
Between 2013 and 2018, government held private auctions for TBs for banks and insurance firms and used a central bank overdraft facility to raise money, driving domestic debt to more than $9 billion.
The high level of TBs issued during this period, and the associated debts servicing costs posed risk on macro-economic stability. The TBs have, in most cases, been discounted in the market, thus contributing towards the current liquidity crisis.
According to Treasury, the stock of outstanding TBs as at June 2018 is US$6.7 billion, with a maturity value of around US$8,3 billion .
The huge quantity of TBs issued during the period 2017 to June 2018 had posed significant burden to the fiscus in terms of both interest and principal payments.
In some instances, this has resulted in a situation where the TBs were being discounted at ridiculous rates in the secondary market, hence undermining market confidence in government securities.
Through the Transitional Stabilisation Programme(TSP) unveiled last October, Treasury resolved that all issuances of TBs and other public debt instruments will be guided by tighter monitoring and management to ensure consistency with the budget framework as approved by Parliament, and that mobilised resources are channelled towards infrastructure development.