|Treasury Bills on the way|
|Friday, 03 August 2012 00:00|
GOVERNMENT will introduce short-term Treasury Bills in the next fortnight in a bid to improve liquidity in the market. Presenting his Mid-Term Monetary Policy Review Statement on Tuesday Reserve Bank Governor Dr Gideon Gono said Government will soon introduce short-term money market instruments.
He said the Government would introduce 90-day and 365-day Treasury Bills in what could help lower the interest rate spike.
“The benefits associated with issuing short-term Treasury Bills go beyond the need to support Government operations.
“Other benefits include the reactivation of the money market and the positive externalities generated through other financial instruments,” said Dr Gono.
The short-term Government paper could also influence the interest rate structure at a time the central bank is limited by resources to be able to control the money market interest rates.
The central bank governor said it was against this background that Government was introducing TBs in a fortnight.
Introduction of the Government paper is anticipated to help eliminate attendant interest rate distortions in money and capital markets.
It is also expected that introduction of the short-term money market instruments would reduce high bank charges, facilitate interbank trading and provide a benchmark interest rate.
“Once Government paper is issued, bank charges will be streamlined, lending rates will normalise and the lender of last resort window can function smoothly with requisite collateral.
“Within this context, interbank trading will also be enhanced as the institutions will have acceptable collateral in the form of short-term Treasury Bills,” said the RBZ governor.
The efforts by the monetary authorities come amid concerns of wide interest rate disparities where deposit rates are lower than lending rates.
Banks with wide deposit bases are offering interest of 0,15 percent to 6 percent while smaller banks are quoting deposit rates of 8 percent to 16 percent to attract customers.
On the other hand, most banks have been charging interest of between 5 percent and 35 percent for both corporate and individual loans.
The prevailing interest rate structure has not been conducive to attracting de- positors and has discouraged borrowing for productive purposes, limiting economic growth.
This has worsened the already dire liquidity situation in the economy struggling to maintain growth of the last three years.
Industry and Commerce Minister Professor Welshman Ncube last year said the manufacturing sector requires US$2 billion for retooling.
And Chamber of Mines president Mr Winston Chitando just over a fortnight ago said the mining industry required US$5 billion for recapitalisation over the next three to five years.
According to the Agricultural Development Policy to be officially launched soon, the agriculture sector requires US$2 billion on an annual basis to sustain various obligations.