via Govt takes over RBZ debt | The Herald November 28, 2013 by Happiness Zengeni
CABINET has approved the takeover of the US$1,35 billion Reserve Bank of Zimbabwe debt by Government in what should pave the way for the smooth recapitalisation of the central bank and repayment of foreign currency account balances taken over during hyperinflation.
Government will assume the RBZ’s domestic debt of US$754,3 million to add it to its existing domestic stock of US$390 million, to give a total outstanding domestic stock of US$1,1 billion.
The central bank’s external debt stands at US$596,02 million which will become part of its stock of existing external debt of about US$7 billion.
According to the proposal seen by The Herald, the debt would be paid through issuance of Treasury Bills (TBs) to banks from which the amounts were levied by the RBZ.
This will be subject to the understanding that the banks will immediately settle small amounts owed to non-corporates of US$500 and below, without waiting for the maturity of the TBs.
The TBs will have a two to five year tenure as reflected in the accounts sitting with the affected banks. The proposed interest rate for these instruments is between 3,5 percent and 5 percent per annum.
In addition, prescribed asset status and features like tax exemption may be granted to the instruments. Government also adopted to settle Statutory Reserves totalling US$83,4 million owed to banking institutions by the RBZ.
The first maturity on the two-year TBs of US$25 million is due on December 31, 2013 while other maturities amounting to US$146 million are due next year. Government will therefore repay the principal amounts on the TBs in staggers from 2015 onward.
The move will go a long way in restoring confidence in the banking sector as well as improve the liquidity of firms whose FCA balances are locked up in the RBZ. For banks, it would enable conversion into earning assets and at the same time ensuring that the maturities do not constrain current Government commitments.
Several companies, NGOs and individuals have instituted legal proceedings against the RBZ over the past couple of years to recover their monies, which the central bank withdrew from bank accounts.
Finance Minister Patrick Chinamasa said Government was making efforts to improve the financial sector.
“We need to restore the role of the RBZ as a banker to Government and as lender of last resort. We need to capacitate the RBZ to supervise the financial services sector adequately as well as establishing interbank lending. All that will cost money but if we demonstrate confidence I am sure that the money will come. For instance the capitalisation of RBZ requires a cool US$200 million while re-establishing interbank lending will need US$400 million,” he said.
The move paves way for the recapitalisation of the institution by both local and foreign investors. It will also facilitate the ability of the central bank to engage in fruitful commercial relationships, which include the mobilisation of foreign lines of credit on behalf of the commercial banks.
COMMENTS
Why are gono kereke not yet doing hard Labour? No normal will invest in treasury bills right now!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
“Government will therefore repay the principal amounts on the TBs in staggers from 2015 onward.”
That statement leads to the question, how will government make these payments if it is broke?
Is it possible that until now the government did not consider the RBZ’s debt to be government debt? Are they only now facing this fact? How can a government function if the different parts are following their own agenda and not a common purpose?
Govern will issue uselees treasury bills that have been rejected on the market to banks to replace the money they stole and then expect the banks to use their own money to give back to the customers. To quote ” the government hopes they don’t have to wait for the bills to mature before give back the money. Who is fooling who here? Government is giving banks useless paper then expect them to give their customers real money? it does not add up. Why not the RBZ to demand really money from the guys who recieved this money as assistance from Gono in 2007-8? Gono has the list. Then the RBZ can give to banks really money for banks to give back to their customers. Is it that difficult? Why bring in these useless bills that no one on the market is interested in. Broad day light robery.
Do you guys above even comprehend what this move means? This is massive and marks the beginning of the restoration of financial markets and all you can do is criticize.
I understand the government is going to issue treasury bills to raise the finance to pay off this debt. Is this not just another scam of trying to print money? Someone will need to buy these treasury bills and have the confidence they will be paid off on maturity or will they go the way of the Zim dollar and become worthless? What value will these bills have if the Zimbabwe dollars returns? Is Mugabe only creating a huge debt for the youth to pay off long after he is gone?
Seems to me some clever one has come up with a solution to create money from nothing with no thought to the future. Gono economics all over again.
These are the offspring of Gonoecomomics. These fatherless offsprings fathered by Gono will roam in the street, rural areas , farms etc. The future of our kids is doomed because of greedy and corruption. Zimbabweans the last thing is that your kids will be attached by court order as guarantee of payment or attachee of last resort
What happens to the 12% interest the courts passed? Why treasury bills? We have been scammed by this bunch of zanoidal looters again.
WHAT HAPPENS TO OUR INDIVIDUAL AND COMPANIES ZIM DOLLAR ACCOUNTS FOR THE WHOLE NATION THEY WANT TO KEEP QUIET ABOUT IT AND STEAL ALL OUR HARD EARNED SALARIES AND PENSIONS.HOW DOES THIS ZANUPF PARTY AND ITS LEADERS OPERATE.ARE THEY NORMAL THESE PEOPLE OR THIS SHARKS OR VULTURES.
BITI HAD SUGGESTED CONVERTING ALL ZIM DOLLAR IN OUR ACCOUNTS TO US DOLLAR WITH AN ACCEPTABLE BUT THESE NON CARING DAYLIGHT ROBBERS WILL NOT ENTERTAIN THAT. WE NEED A MESSIAH TO RESCUE THIS INNOCENT NATION LED BY MAFFIA.
Hey I could do with US$5,000,000,000,000,000,000,000.You think they may exchange 1 for 1 !!!???
Ha Zimbabwe yakatokora…what will ever change when you have the same people who brought about the total collapse still in charge? It’s quite mental.
This is fraud. The RBZ debt was incurred when Gono and ZANU PF went into an unnecessary deals for buying agricultural impliments which are idel now due to poor implimentation of the land reform. Majority of these were distributed to the ZANU PF campaining teams to deceive the masses tha ZANU PF is sponosoring them. Majority of ZANU PF supportors are not even going to support the debt by buying the TB or even investing them or paying taxes to finance the issuance of TBs. Government is not a profit making venture. They get finances through taxation, all ZANU PF members companies like Guishungo Holdings do not pay taxes or even import duty on their importations. The very people who were denied support by ZANU PF since the impliments were distributed are the very people financing this debt how cruel.
What caused RBZ to go into such a debt….this is simply a clever way of writing off the debt on RBZ books which in turn it is owed by the shefs, now being passed to the tax payer. These guys have been stealing through the same tricks for years…remember the Boka saga? They then ask you to pay tax… Mafia chaiyo.
Plz plz plz we are tired with ZANU
Ha! Ha! Ha! Ha!, my sides ache.