In the National Assembly Tuesday 11th April 2017
MINISTERIAL STATEMENT
ISSUANCE OF TREASURY BILLS AND BONDS
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Mr. Speaker Sir, I rise to make a Ministerial Statement on the Issuance of Treasury Bills and Bonds. Mr. Speaker Sir, my Ministerial Statement provides important information about the issuance of Treasury Bills and Bonds by the Government of Zimbabwe. A Treasury Bill is a short term debt obligation backed by the Government with a maturity of less than one year. Bonds, on the other hand, have a maturity of more than one year. I will use the acronym “TBs” to represent both Treasury Bills and Bonds.
Mr. Speaker Sir, my statement will cover the following critical areas: total issuance of TBs since 2014; TBs that matured and have been liquidated; outstanding TB maturities; and Government’s policy on effective management of domestic debt with a view to minimising the issuance of TBs. The Central Government issued TBs to raise money to fund its programmes as well as to address legacy issues that include servicing Government debt; the Reserve Bank of Zimbabwe (RBZ) debt; Recapitalisation of Public Institutions; and takeover of collateralised Non-Performing Loans on the balance sheets of Commercial Banks by Zimbabwe Asset Management Corporation (ZAMCO).
Mr. Speaker Sir, I have appended supporting tables to my statement for the benefit of Hourable Members of Parliament and the general public and plead that they peruse these in the Hansard. Mr. Speaker Sir, Government remains fully cognisant of the need to effectively manage risk that is associated with over issuing of TBs in the market and the implication that it may cause.
Issuance of Treasury Bills
With respect to issuance Treasury Bills, the total value of Treasury Bills issued since 2014 stands at US$4.417 billion. A total of US$1.102 billion has since matured and been liquidated leaving an outstanding amount of US$3.315 billion as at 3rd March, 2017.
Table 1: Issuance of Treasury Bills
2014 / 2015 / 2016 / 2017 / TotalAmount Issued / 705,043,241 / 1,381,371,792 / 2,018,725,945 / 311,760,551 / 4,416,901,529
Matured and Liquidated / (260,041,205) / (648,832,382) / (192,937,644) / - / (1,101,811,231)
Outstanding / 445,002,036 / 732,539,410 / 1,825,788,301 / 311,760,551 / 3,315,090,298
Mr. Speaker Sir, 25% of the amount raised went towards the financing of Government programmes while 75% went towards dispensing with legacy debts as shown in Table 2.
Table 2: Utilisation of TB Proceeds
US $ / % of total IssuanceFinancing of Government Programmes / 1,104,779,334 / 25.0%
Government Debt / 1,686,780,970 / 38.2%
RBZ Debt / 925,453,385 / 21.0%
Capitalisation of Public Institutions / 196,878,384 / 4.5%
ZAMCO / 503,009,457 / 11.4%
Total / 4,416,901,529 / 100%
Government has been honouring its obligations – I want to emphasise this. We have been honouring our obligations on the maturing Treasury Bills as demonstrated by a total of US$1.102 billion that has so far been repaid timeously. The breakdown of this amount is as set out in Table 3.
Table 3: Liquidation of matured TBs
Activity / US$ / % of amount raised for the activityFinancing Government Programmes / 641,618,405 / 58.1%
Government Debt / 382,320,006 / 22.7%
RBZ Debt / 59,172,820 / 6.4%
Capitalisation of Public Institutions / 0 / 0.0%
ZAMCO / 18,700,000 / 3.7%
Total / 1,101,811,231 / 24.9%
Let me now turn to a brief discussion on the main areas that benefited from the resources mobilised through Treasury Bills.
Financing Government Programmes
Government occasionally goes to the market to raise resources to fund its critical expenditures such as infrastructure, production and recurrent expenditure among others. Government has been able to fund projects such as Tokwe-Mukorsi and other infrastructural projects as well as productive activities using Treasury Bills.
Under normal circumstances, such infrastructural project would have been funded by long-terms loans from Development Financial Institutions such as the World Bank and African Development Bank among others. However, this has not been possible for Zimbabwe given the country’s external debt overhang.
A total of US$1.105 billion was raised since 2014. Of this amount US$641,6 million has since matured and been repaid leaving an outstanding amount of US$463.2 million.
Table 4: Financing of Government Programmes
US$Amount Issues / 1,104,779,334
Matured and Liquidated / (641,618,405)
Outstanding / 463,160,928
Issuances for the Financing of Government Legacy Debt
Mr. Speaker Sir, Government remains a major economic player in the market. It draws services from both private and public institutions. These services should, however, be paid for. Unfortunately, Government has, over the years, been “consuming” these services without paying for them resulting in the accumulation of domestic arrears.
Failure to pay by the Government for the services rendered negatively affected the operations of the local industry. Therefore, Government has since issued US$1.687 billion worth of TBs to meet its debt obligations to various local players since 2014.
A total of US$382.3 million worth of TBs have since matured and been honoured leaving an outstanding stock of US$1.304 billion.
Table 5: Financing of Government Legacy Debt
US$Amount Issued / 1,686,780,970
Matured and Liquidated / (382,320,006)
Outstanding / 1,304,460,964
A number of firms in the production sectors have resuscitated their production due to the initiatives taken by Government to honour its commitments and legacy debts.
Assumption of RBZ Legacy Debt
Mr. Speaker Sir, the amounts issued towards the financing of the RBZ legacy debt were subject to validation and reconciliation according to the RBZ Debt Assumption Act, which was passed by this House not long ago. As a result, Government issued TBs worth US$925.5 million. Of this amount, US$59.2 million has since been paid while a total of US$866.3 million remain outstanding as at 3 March, 2017.
Issuance for the Recapitalisation of Public Institutions
Public Institutions are essential vehicles through which Government influences economic activities. However, low capitalisation of such institutions has been negatively affecting the operations of some of these critical institutions.
In view of this, Government has extended a total of US$196,878 million towards recapitalisation of Public Institutions as set out in Table 6.
Table 6: Capitalisation of Public Institutions
Institution / US$Reserve Bank of Zimbabwe / 110,000,000
Agribank / 36,878,384
ZB Bank / 20,000,000
People’s Own Savings Bank (POSB) / 20,000,000
Small and Medium Enterprises Development Corporation (SMEDCO) / 10,000,000
Total / 196,878,384
Issuance for the financing of ZAMCO
Mr. Speaker Sir, with respect to issuance of TBs for financing ZAMCO, the financial services sector stability remains crucial for sustainable development. However, when we noted rising Non-Performing Loans (NPLs), we could see that this threatened to cripple the country’s financial services sector.
Government responded by establishing the Zimbabwe Asset Management Corporation (ZAMCO) that bought collateralised NPLs on the balance sheets of Commercial Banks. As at 3 March, 2017, the total NPLs bought by ZAMCO amounted to US$503,009,457.
This strategic initiative sought to:
Give banks an opportunity to release resources that had been tied
up in NPLs so that they could continue to support economic activities throughout the country; and
Help borrowers to restructure their facilities so that they would
continue to service their loans at affordable interest rates over a relatively longer period. Banks tend to impose stringent conditions for customers who are in default, thereby pushing them further down the cliff.
Government has also made a conscious decision to resuscitate CAPS Holdings and Cottco through warehousing their (these companies’) legacy debt under ZAMCO before Government fully takes up its equity.
Mr. Speaker Sir, I hope my statement will help address the speculation in the market regarding the amounts raised through the issuance of TBs, utilisation of proceeds, liquidation of maturing TBs and the outstanding stock of TBs.
Government has never defaulted on any of the maturing TBs. It is therefore, important for anyone who wants to comment on TBs to do so from an informed position and to always endeavour to get the correct information from either Treasury or the Reserve Bank of Zimbabwe.
Mr. Speaker Sir, Government is fully aware of the implications of TB issuance for the financial sector stability and economic growth. I thank you once again Mr. Speaker Sir.
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