Zimbabwe currently has about $2.1 billion worth of treasury bills in the market, issued to bridge the government’s funding gap and clear the central bank’s debt, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said.
The government’s domestic debt has ballooned from about $300 million in 2012 to $3.7 billion (26 percent of GDP) by October 2017, according to Treasury data.
In an interview with the private weekly Zimbabwe Independent, Mangudya said the bills — which make up nearly a quarter of total bank assets of $8.7 billion as at the end of 2016 — have also been used to take bad debts off bank balance sheets, bail out ailing firms and recapitalise state-owned banks.
The government’s increased reliance on issuing TBs to fund itself has seen the issuance of the paper rise from nil at dollarisation in 2009 to current levels above $2 billion.
The trend has alarmed some analysts who contend that the purchase of TBs by banks have crowded out lending to the productive sectors while compounding liquidity shortages in the economy.
“The issuance of Treasury Bills by government takes into account the need to strike a balance between the desire to bridge the gap between revenue collection and expenditure and the need to ensure that the maturity profile is sustainable,” Mangudya said.
The government’s 2016 gross revenues were $3.462 billion, below the targeted $3.607 billion.
Expenditures, on the other hand, exceeded revenue by $1.2 billion.
“The first category are long-dated TBs of $549 million issued to banks for the acquisition of non-performing loans by the Zimbabwe Asset Management Corporation (ZAMCO),” Mangudya told the Independent.
Another tranche of $300 million long-dated TBs was issued for the capitalisation of the RBZ, Agribank, the Infrastructure Development Bank of Zimbabwe, ZB Bank, Cottco and stricken pharmaceutical firm Caps, which the government is in the process of taking over.
“The third category are medium to long-dated TBs amounting to $780 million issued under the Reserve Bank Debt Assumption Act for the central bank debt taken over by government,” Mangudya added.
“The fourth category are short to medium dated TBs in an amount of $450 million issued to finance the gap between expenditure and revenue collection by government.”
Mangudya said while the ZAMCO and state bank recapitalisation TBs are held to maturity, paper in the last two categories could be traded in the market.- The Source