11 April 2017
HARARE – Revelations that government is issuing Treasury Bills to raise
money to pay bonuses for the 300 000-plus civil service confirms what we
have been saying all along.
Government’s decision to pay the unbudgeted 2016 bonus after pressure from
employee unions is likely to worsen the situation as Treasury Bills worth
$180 million are expected to be floated in the market to finance these
The stone-broke government is in fact issuing billions worth of TBs that
are fuelling the intensifying cash shortages. This also comes as the new
bond notes – ushered in to help address the epic cash problems – are
losing value dramatically and US dollars have vanished from the open
With imports massively outstripping exports, businesses are mostly selling
their merchandise in bond notes, making it impossible to finance imports
using the surrogate currency, with an informal forex market now
discounting the bond note and the Real Time Gross Settlement (RTGS)
With laws of supply and demand at play, Zimbabweans are outrightly
refusing to accept the notes as equivalent to US dollars. A key test will
come when Zimbabwe reaches the $200 million bond notes threshold backed by
a facility provided by Cairo-based Afreximbank.
Government is borrowing money from the domestic market to finance
government expenditure, including payments to civil servants, but getting
the cash out of banks will be the problem.
Finance minister Patrick Chinamasa admitted the issuance of TBs in the
House of Assembly last week, saying that government’s decision to pay the
2016 bonus is likely to worsen the situation.
On the surface, the financial sector remained somewhat resilient despite
clear headwinds in the form of growing exposure to TBs, uncertainty around
bond notes and a decline in quality borrowers under the economic
We are wary of the financial sector as balance sheets become heavily
exposed to TBs and as cash balances begin to lean towards bond notes
relative to hard forex. The country was estimated to have about $2,1
billion worth of TBs in the market as at February 28, 2017. Zimbabwe faces
a huge debt burden.
Its total external debt is estimated at $11, 2 billion, or 79 percent of
GDP, at the end of 2016. More than half of it, or $7,5 billion, is in
If current economic policies continue and donor financing is largely
confined to humanitarian assistance in the medium term, the country’s
large debt stock would remain unresolved and debt would continue to pile
But to win debt relief, Zimbabwe would need to improve ties with the
international community and qualify for a global scheme for
heavily-indebted poor countries that would lead to debt cancellation after
a two-year economic programme.