Golden Sibanda Senior Business Reporter
THE Reserve Bank of Zimbabwe says the $2 billion Treasury Bills issued by Government, including for clearing its debts, will help boost economic recovery and improve liquidity for holders of the securities.
The RBZ governor Dr John Mangudya dismissed sentiment from certain quarters that the issuance of the financial instruments was excessive and had the negative effect of crowding out borrowing by productive sectors.
The central bank chief’s sentiment around overcrowding of private sector in the financial market was confined to the notion that Government should keep an eye on borrowing for consumption.
“If there was crowding out of productive sectors, it would mean that banks would not have money in terms of their RTGS positions.
“If you look at the banks’ RTGS positions at the central bank . . . they have liquidity. If you look at the companies’ financial statements . . . their liquidity ratios are also very high; it means they have money to lend.”
Dr Mangudya said the TBs were composed of four categories namely RBZ debt assumption ($780 million), RBZ capitalisation ($300 million), Government expenditure ($450 million) and ZAMCO ($500 million).
The RBZ debt assumption resulted in Government assuming the $1,3 billion the central bank owes to several creditors, the bulk of which was incurred during the mechanisation programme at the height of the quasi-fiscal programmes carried out by the RBZ.
TBs for capitalisation were meant to capacitate the bank to resume some of its key functions following effects of hyper inflation. TBs also helped raise funds for key Government programmes.
Treasury is not receiving enough inflows to be able to meet public financial obligations with the bulk of the budgeted revenue inflows, about $3,8 billion this year, going to recurrent expenditure.
In terms of ZAMCO, the central bank issued TBs to finance takeover of bad loans on banks’ balance sheets and enable the financial institutions to extend fresh credit to productive sectors.
Dr Mangudya said it was incorrect to assert that the TBs could crowd out private sector, as Government was mobilising funding to clear its liabilities, in instances long-standing, to the same entities.
“Government is issuing Treasury Bills to pay the debts, and to say its crowding out private sector would be incorrect.
“The people who were owed are the private sector and by paying them it means they will start producing goods and services,” he said.
“At the very best, we are helping the economy to expand. For example, if you were in clothing and manufacturing and delivered your products, but have not been paid for 20 years, 16 or five years and get paid through TBs; you accept, but claim that you are being crowded out, that is inconsistency,” Dr Mangudya said.