‘Govt never defaulted on paying TBs’

Source: ‘Govt never defaulted on paying TBs’ | The Herald April 13, 2017

Business Reporter
Government says it has never defaulted on paying or liquidating Treasury Bills on maturity, pointing out that to date instruments worth $4,4 billion had been issued since 2014.

In reference to funds raised by Government through TBs and bonds in the last three years, Finance and Economic Development Minister Patrick Chinamasa said $1,1 billion, 25 percent of total, had matured and been paid.

“A total of $1,102 billion (TBs) has since matured and liquidated, leaving an outstanding amount of $3,3 billion as at March 3, 2017,” he said.

A Treasury Bill is a short-term debt obligation backed by Government with maturity of less than one year while a bond matures after 12 months.

The minister said that 25 percent of the funds raised went towards financing of Government programmes and the balance to clearing legacy debts.

Minister Chinamasa made the remarks while delivering a ministerial statement on the issuance of TBs and bonds in Zimbabwe to Parliament yesterday.

This came following claims from certain quarters that Treasury, which is facing financial constraints due to a challenging economic environment, may fail to honour some of its financial obligations on maturity.

“I hope my statement will help address the speculation in the market regarding the amounts raised through the issuance of TBs, utilisation of the proceeds, liquidation on maturity and outstanding TBs.”

Minister Chinamasa said that he was fully aware of the implications of TB issuances for domestic financial sector stability and economic growth.

Expenditures on the funds raised went to clearing the Reserve Bank debts, Government legacy debts, takeover of non-performing loans in banks and for recapitalisation of strategic public institutions or entities.

A total of $925,5 million TBs were issued to expunge RBZ legacy debts, $196,8 million for recapitalisation of public entities, $503 million for NPLs and $382,2 million for clearing Government legacy debts.

Strategic entities recapitalised from TBs included RBZ $110 million, Agribank $36,8 million, ZB Bank $20 million, People’s Savings Bank and Small and Medium Enterprises Development Corporation $10 million.

The Treasury chief said of the nearly billion dollar TBs for RBZ debts, $59,2 million had been paid while $382 million of $1,687 billion Government legacy debts had matured and been successfully liquidated.

Failure to pay by Government for services rendered, he said, negatively affected industries, hence the decision by Government to issue the TBs.

Occasionally, the minister said, Government also goes to the market to mobilise financial resources to finance critical programmes such as infrastructure, production and recurrent expenditure among others.

Ordinarily, programmes such as infrastructure programmes should be funded from long term loans from development finance institutions; however that has not been possible due to Zimbabwe’s external debt.

“A total of $1,05 billion was raised since 2014. Of this amount $641,6 million has since matured and has been repaid, leaving an outstanding amount of $463,2 million,” Minister Chinamasa said yesterday.