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Business Reporter

Zimbabwe plans to raise $30 billion through the issuance of Treasury Bills and bonds to finance its 2021 budget deficit, the Government debt plan show. 

Treasury bonds and Treasury Bills are all Government-issued fixed income securities that are deemed safe and secure. 

T-bonds have longer maturity terms and offer investors the highest interest payments bi-annually while the T-bills have the shorter maturity period of up to one year. 

The soaring spending is largely due to response to Covid-19 pandemic, subsidies on selected agriculture commodities and increase in state sponsored farming schemes, Treasury officials said yesterday. 

According to the Government debt plan for 2021, the auctions will now be held every Thursday with 80 percent of the money expected to be raised from the Treasury bills while the remainder from Treasury Bonds. 

The Treasury bills will be a combination of 180 days, 270 days and 365 days while maturity period for the bonds ranges from two years to 10 years. 

The Treasury assumes there would be stability in the exchange rate (now around $85 to US$1) , a single digit inflation by year end and positive real interest rate. 

It also said external grants were off budget while no substantial external loans will be contracted this year. 

“The Government will spend more to tackle challenges being caused by the pandemic and of course subsidies particularly on cotton. 

“The Government is also looking to partly finance tobacco this season,” said one Treasury official who requested not to be identified because he is not authorised to talk to press. 

During the first quarter, Government spent as much as $8 billion on social benefits against a budget of $3 billion largely in response to Covid-19. For instance, harmonised cash transfers were raised while more beneficiaries were added on the programme. 

The Government has also indicated plans to finance tobacco this year as it seeks to maximise value from the commodity, which is currently being financed by offshore capital. 

On subsidies, Government will subside cotton farmers who were under the Presidential Inputs Scheme through the Cotton Company of Zimbabwe. About 85 percent of production was financed through the scheme. With about 145 000 tonnes expected this season, about $7,3 billion is needed for subsidy. 

Banks and other local investors such as pension funds are usually the main buyers of Zimbabwe’s domestic debt. The Insurance and Pension Commission has advised its members to subscribe to help meet prescribed asset thresholds.