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Business Reporter
INSURANCE and property company Old Mutual and the National Social Security Authority last week purchased Treasury Bills worth $30 million that were floated by the Reserve Bank of Zimbabwe. Treasury officials told The Herald Business that Old Mutual bought $20 million 365-day bills while NSSA bought $10 million 90-day bills.

The 365-day bills have a half-year coupon and a yield of 10 percent while the 90-day bills have a yield of 7 percent.
The sale comes in the same week the central bank floated $103 million TBs spread over 3-5 years at a rate of 2 percent per annum with prescribed asset status, liquid asset status and are tax exempted.

The TBs were expected to go towards clearing FCA balances owed by the central bank. Government has prioritised the recapitalisation of the RBZ. Capitalisation of the central bank is an essential condition for it to resume its role as a Banker to Government and eventually its Lender of Last Resort role.

The issuance of debt instruments to local financial institutions and other players who were owed by the RBZ is expected to restore confidence in the bank and in the financial sector.

Retiring the central bank’s $1,35 billion debt is a confidence building measure and restoration of lender of last resort will be key in enhancing the role of the RBZ in promoting stability in the financial sector.

In his 2014 National Budget statement Finance and Economic Development Minister Patrick Chinamasa said the RBZ’s domestic debt stock of $754 million will be addressed through issuance of 5-year Government paper while the external debt component amounting to $596 million due to external sources will be addressed as part of the Government’s overall External Debt Resolution Strategy.

He said that the debt instruments shall be in the form of Government securities that shall be accorded Tier One Capital Status.
Minister Chinamasa said after servicing the RBZ debt the second stage is to raise between $150-$200 million to capitalise the central bank, in order for it to provide liquidity support to the financial sector as we proceed to ensure that it effectively plays its Lender of Last Resort role and re-discount market instruments when the need arises.

The resolution of Zimbabwe’s debt overhang is key to normalising Zimbabwe’s relations with the international financial institutions and bilateral creditors. The debt overhang has become one of the serious impediments to the country’s developmental agenda, according to Minister Chinamasa