Infrastructure stock rising due to Treasury Bills

Tawanda Musarurwa
Treasury Bills (TBs) have mostly been channelled towards infrastructure development and Government had managed to keep its borrowing under manageable levels, Finance and Economic Planning Minister Patrick Chinamasa has said.

TBs are negotiable instruments issued by Government through the Reserve Bank of Zimbabwe (RBZ) to finance the State’s short-term requirements.
They are issued for periods ranging from 30 to 365 days.

Although TBs are generally considered as the least risky of all issued paper since as they are guaranteed by Government, some market analysts opine that limited economic activity and high debt-serving costs could pose some financial risks on domestic debt instrument holders.

Minister Chinamasa said TBs are simply a debt instrument and there is nothing wrong with Government borrowing to enhance economic performance.

“What is important with any borrowing is what you are using the money for.

“I don’t have the percentages now but if you look at the TBs that are issued, I can justify the deployment of the funds that we raised through TBs. Firstly, they have been used to put up critical infrastructure.

“The Tugwi-Mukosi Dam was built and completed through TBs. The Gwayi-Shangani Dam, the Marowanyati Dam and Causeway Dam are all being constructed through TBs,” he said.

“Over and above, through TBs we identified companies which we considered were very vital in the economy and we used TBs to support them because we found that the commercial banks were not lending to the private sector.

“As you are aware, the commercial banks had huge non-performing loans and again we used TBs to rescue the commercial banks from collapse through the creation of the Zimbabwe Asset Management Company (ZAMCO). We did all that through TBs.

“Again we used TBs to retire some of the indebtedness that we inherited from the Reserve Bank, $1, 2 billion thereabouts. Some of the debts that we acquired through the RBZ Debt Assumption law were through TBs.”

The Finance Minister said despite concerns in the market, the Government had kept its borrowing under manageable levels.

In 2016, Treasury announced that the issuance of new TBs would be guided by projected cash-flows.

“When you look at the TBs or borrowing, we have kept them under manageable levels in my view.

“The borrowing has mostly gone towards infrastructure and very little towards consumption. In any case, we have never defaulted on our TBs.”

A number of financial players hold Government-issued TBs, as they have become the main debt instrument available in the market after Government converted its legacy debt into short-dated Government security.

A notable increase in the number of financial entities holding the TBs highlight growing faith in the instruments.

In 2017, TBs holdings for Stanbic, Standard Chartered and MBCA, for example, went up by 186, 2 percent, 94, 8 percent and 719, 1 percent respectively.

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