Treasury paying out RBZ debt

Source: Treasury paying out RBZ debt | The Herald February 22, 2017

Business Reporter

TREASURY has paid out about half of the $1,4 billion debt Government assumed from the Reserve Bank of Zimbabwe. Government took over the central bank debt to enhance financial sector stability as well as enable the RBZ to perform its core functions.The $1,4 billion debt was made up of $690,5 million domestic debt and $733,4 million external debt. Settlements are only being processed after a validation process as required by the Reserve Bank Debt Assumption Act of 2015.

Principal director — Fiscal Policy — in the Ministry of Finance and Economic Development Pfungwa Kunaka, who stood in for permanent secretary Willard Manungo at the Parliamentary Portfolio Committee on Finance and Economic Development said the validation process was in progress for the outstanding payments.

“Of the total RBZ debt amounting to $1,4 billion, about $745,7 million has been issued while the balance of $678,2 million outstanding,” said Mr Kunaka.

“To date treasury bills amounting to $376,9 million and cash amounting to $4,2 million has been paid out to domestic creditors against a total of $690,5 million stated in the Act.

“With regards to settlement of external creditors, treasury bills amounting to $364,6 million have been issued out of a total of $733,4 million stated in the Act,” said Mr Kunaka.

Section 5 of the Act provides for the validation and reconciliation of claims under the Act as a prerequisite for final settlement. Documentation required for the validation process include loan agreements, contracts and court judgments, among others.

Section 3 provides for an interest rate of 5 percent from date of contraction while Section 4 (2) provides for the minister’s prerogative in fixing the terms for settlement.

Mr Kunaka said there has been no situation were creditors refused payment through issuance of treasury bills but instead there was appetite for the debt instruments.

“In terms of appetite and readiness of the market to take treasury bills, I want to say upfront generally, all economic players have an appetite for treasury bills. When they look and asses the financial position of Government it looks like the message has gone through.

“There is an understanding that Government is facing cash challenges so the financial constraints which we are facing, which makes it ordinarily uncertain how and when someone can expect payment for whatever is owed by Government, it makes the TB instrument very attractive to nearly everybody.

“So all the creditors which we have, if their information and documentation was in order they will definitely be clamouring for liquidation for settlement through treasury bills. So it is not a challenge at all to liquidate these debts through treasury bills,” said Mr Kunaka.