Economists sceptical about road bonds success

ECONOMISTS are sceptical of the success of the government’s planned issuance of infrastructure and road bonds to finance construction of hostels and lecture halls at tertiary institutions and maintenance of dilapidated national roads, saying the government is too broke to repay the loans.

Source: Economists sceptical about road bonds success – NewsDay Zimbabwe March 3, 2017

BY PAIDAMOYO MUZULU

The comments come in the wake of the Higher and Tertiary Education ministry and CBZ Holdings on Tuesday signing an agreement to raise a $2 billion infrastructure bonds for building student and staff accommodation, lecture halls and laboratories at various tertiary institutions of learning.

Finance minister Patrick Chinamasa has also announced that government will float a roads bond soon.

Economist Prosper Chitambara said the political and economic environment was not attractive to foreign investors.

“There is no appetite among investors due to political and economic uncertainties associated with Zimbabwe at the moment and this will affect the bonds subscription,” Chitambara said.

The economist added Zimbabwe was technically broke and investors fear the government may fail to honour the bonds when they mature.

“The government track record on payment of debts is not impressive and locally one can see that they are failing to pay Treasury Bills on maturity and instead are rolling over the debt,” Chitambara said.

Another economist, Godfrey Kanyenze, concurred with Chitambara, saying: “The bonds are a good idea, but government has to make them attractive to investors and show it can honour them when they mature.”

The government has been struggling to fund its capital expenditure projects in the last decade as recurrent expenditure grew exponentially.

By the end of 2016, it was spending over 90% of its budget on salaries and wages.

The scenario has meant the country could not build any new roads or school or maintain the deteriorating infrastructure.

COMMENTS

WORDPRESS: 2
  • comment-avatar
    Joe Cool 6 months

    There is no problem at all – they will pay out on the road bonds using bond notes. This is the genius of the Zimbabwe government which less astute financiers fail to grasp.

  • comment-avatar
    Chatham House 6 months

    This is truly a wonderful concept. Bond notes, road bonds and infrastructure bonds. Perhaps we should change the President’s name to James Bond? Zanu lives in the delusional world thinking that the party has the powers of their very own version of James Bond. James Bond at 93!