Treasury Bills stocks up 28pc

HARARE - The stock of Treasury Bills (TBs) and bonds in issue increased 28,2 percent to $2,5 billion at the end of June from about $1,95 billion recorded in April, the central bank governor has said.

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya on Wednesday said the bulk of the instruments — about $826,8 million – had been issued to expunge RBZ’s legacy debt under the central bank’s Debt Assumption Act.

“Some (TBs) worth $262,7 million went towards capitalisation of institutions where government has interest, government programmes including drought-related expenditures received $531,2 million, with the Zimbabwe Asset Management Company getting $568,3 million,” he said, adding that $312 million had been spent on government recurrent expenditure.

Mangudya said domestic credit recorded an annual increase of 21,10 percent from $6,9 billion in May 2016 to $8,4 billion in May 2017.

“The growth was largely due to a 38,6 percent annual expansion in net credit to government. The surge in net credit to government is consistent with increased recourse by government to domestic sources of financing, on the back of reduced revenue collections. In addition, the growth in credit to government, reflected banks’ holding of TBs, which are largely purchased at a discount on the secondary market,” he said.

Despite government’s heavy borrowing, credit to the private sector recorded a modest growth of 1,99 percent, from $3,4 billion in May 2016 to $3,49 billion in May 2017.

Mangudya was, however, quick to point out that Treasury and the central bank are moving to ensure conservative issuance of the instruments.

“Notwithstanding this developmental aspect of TBs, it is critical, going forward, that an equilibrium position of a sustainable fiscal deficit is ascertained to ensure that TBs do not crowd out foreign exchange in the market,” the central banker said.

Equity analysts, Imara, recently cautioned local banks against large TB holdings.

“TBs held by local banks have been increasing and this is surprising as we feel that the financial sector cannot justify holding more TBs given their limited capital base,” Imara said.

Presently, CBZ Bank is the most exposed bank with a ratio of over four times equity followed by ZB Bank at two times as banks channel their rising deposits back into TBs, which has curtailed the ability of depositors to withdraw their money in the form of cash resulting in long queues outside banks.

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