TBs will spur economy — RBZ

Dr Mangudya

Dr Mangudya

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.

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  • Piankhi

    The Governor is either a fool. Or just piling on debt that cannot be serviced. It is a shame how these scams go on just to operate government bloated civil servant salaries. And this is from the President that is basically started for the election to buy votes. The Governor will go down in flames. There is no such issuance of debt that can spur the economy. The Governor speaks to the people because he knows they do not understand the under handed dealing at the RBZ. This governor is nothing but a ###and is doing the same as Gideon Gono and is a willing participant in the crimes they are committing at RBZ at his direction from the top. But all will be exposed soon. This #### This guy is a bold face liar.

  • #TeamMugabe #TeamBob #TeamAmai

    TBs are not the problem. Bank queues are the problem. The people must be able to withdraw their money. That is the President’s order and it must be obeyed.

    Government must print Bond Notes for all the money held in local banks, but no more than the money on deposit.

    Printing Bond Notes will do nothing more than monetise the money held in banks, it will not cause inflation. That money can already be spent using plastic money, etc. so printing it as Bond Notes will only make it easier for money held in banks to be used as a means of exchange, which is what money is for.

    Do not believe the doomsayers, there will be no hyperinflation. These additional Bond Notes will be backed by real money in the banks – we do not need another Afreximbank facility. We are not printing bank notes for money that doesn’t exist.



    • Finance

      Are you high? Do you know how the financial system works? Do you have even a basic understanding of how it works? Please dont just comment for the sake of commenting and expose your stupidity. At times its better to shut. Stop embarrassing yoursel

  • Prof Dombo

    You are absolutely right Antitraitor….
    We appreciate your hard work Dr Governor and we are fully behind you….

  • Panga

    He is borrowing too much and he will need to print more money to repay these loans