FINANCE and Economic Development Minister Mthuli Ncube says the Government intends to launch a US-dollar bond and list it on the US dollar-denominated Victoria Falls Stock Exchange (VFEX) to build a yield curve for both domestic and foreign debts.
The VFEX is a subsidiary of the Zimbabwe Stock Exchange (ZSE), launched late last year as part of efforts to attract global capital, while also helping restore foreign investor confidence in Zimbabwe’s capital markets and help companies raise capital in foreign currency.
Minister Ncube, speaking on a webinar on Zimbabwe’s Economic Recovery Path, without pre-emptying the size of the bond, said work on the bond had advanced.
“We are working hard on it. Advisers are fine tuning things. We want to make sure that we also start to build a yield curve, not just for domestic debt, but also for foreign debt on VFEX,” he said.
Seed Co International in 2020 become the first counter listed on the VFEX exchange and to date several mining and export oriented companies have shown interest to list on the bourse.
Minister Ncube said the Government working with the private sector and regulators that fall under its purview are working hard to create micro-institutions that enable and facilitate investments by the private sector, whether on an exchange or specific instruments.
The minister noted that as part of the wider economic reform agenda, the Government developed an arrears and debt clearance restructuring strategy where it is now engaging various countries over its external debt which is estimated at over US$8 billion.
“The engagements are to see who could be a sponsor, because we need a sponsor, and once we are successful we will be able to move to the next stage which is to tackle those areas with the World Bank and African Development Bank and preferred creditors,” he said.
Minister Ncube said for now, the Government has taken the step of beginning to pay token payments to the World Bank and AFDB, as well as the European Investments Bank “to show that we are good debtors”.
“We have also taken yet another step which we have not done in the last 20 years, which is to start token payments to the 17 Paris Club bi-lateral creditors, among them UK, USA, Italy France and Japan, where we also intend to be seen as good debtors,” he said.
According to the minister, the reform agenda started in 2018, with the priority to address the twin deficit of budget and current account deficit, with the 3rd leg being to introduce fiscal policy.
Minister Ncube said over the last 3 years, the economy has done well on the fiscal consolidation agenda, and has been able to balance the budget and in some cases recording a surplus.
“We have eliminated the capacity of the fiscal side of creating unnecessary money creation and stopped using overdraft window from the Reserve Bank of Zimbabwe (RBZ) to pay wages. Since January 1, 2019, Treasury has not borrowed anything from the RBZ window and doesn’t see using it until the middle of 2023,” Minister Ncube said.
He said the introduction of the foreign currency auction system resulted in several companies accessing capital for retooling and financing operations which has resulted in increased capacity utilisation.
He added that fiscal consolidation, position of external sector balance as well as the monetary sector, has delivered the stability that the economy has enjoyed so far at least in the last 12 months.
Minister Ncube said the Government was bullish on projected economic growth of 7,8 percent which would be supported by a transparent allocation of the SDR funds.
The country last week received the equivalent of US$961 million in Special Drawing Rights (SDRs) from the International Monetary Fund, part of US$650 billion the IMF is distributing to its members.
“We are bullish on the economy this year, and the rainfall outlook as last year, an indication that we will do well in agriculture and create reserves for years to come,” he said.
He said the SDR Funds will also support the reserve agenda, but over time will invest in some developmental projects, where the remainder is kept in SDR form to bolster the reserves and any contingent funding required for any project in future.
“We have formed an implementation committee I chair, which also has the RBZ Governor, Secretary for Finance and will report to President Mnangagwa on a monthly basis,” he said.