Treasury pays US$356 million for maturing TBs

Treasury has paid over US$356 million for maturing Treasury Bills (TBs) in the first half of 2024, according to Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube.

This comes as part of a broader effort that saw the Government make domestic debt payments totaling Z$434 billion, ZiG77.7 million and US$356,2 million from January to June 2024.

“Government made domestic debt payments on maturing TBs amounting to Z$434 billion, ZiG77,7 million and US$356,2 million during the period January – June 2024.

“The country’s stock of debt as at end of June 2024 amounted to ZiG287,2 billion, comprised of external debt of ZiG168,5 billion and domestic debt of ZiG118,7 billion. The debt stock is broken down as 58,7 percent external debt and the remainder being domestic debt 41,3 percent,” Mthuli said.

Such payments reflect a crucial step in maintaining the trust and confidence of financial institutions, particularly banks, which are the primary holders of these instruments.

The breakdown indicates that 58,7 percent of the debt is external, while the remaining 41,3 percent is domestic. Notably, the domestic debt includes ZiG69,3 billion in government securities, ZiG66,4 billion for the compensation of former farm owners, and ZiG2,9 billion in arrears to service providers.

Commenting on the development, economist, Tinevimbo Shava, emphasised the positive signal it sends to the market.

“The Government’s ability to meet its debt obligations, particularly in the context of Treasury Bills, is a critical indicator of fiscal health and stability. It reassures investors and banking institutions that the Government is a reliable counterparty. This reliability is essential for the continued willingness of banks to hold Government securities and extend further credit,” he noted.

Government’s approach to issuing Treasury Bills through private placement has been strategic. The instruments, with tenures ranging from 90 to 365 days, offered attractive annual average coupon rates of 75-92 percent.

The banking sector’s overwhelming participation, providing 99 percent of the raised resources, highlights the strong relationship between the Government and financial institutions. Gladys Shumbambiri-Mutsopotsi, an economic analyst, highlighted the importance of this relationship.

“The banking sector’s confidence in Government securities is paramount. When banks trust that the Government will honour its debt commitments, they are more likely to participate in future issuances. This relationship is mutually beneficial. For the Government, it ensures access to crucial funding, while for banks, it provides a relatively secure investment with predictable returns,” she said.

This positive dynamic between the Government and the banking sector, has broader implications for Zimbabwe’s economic growth. Stable and predictable debt servicing can help maintain low borrowing costs for the Government, allowing more resources to be directed towards developmental projects. Furthermore, it can stabilise the financial sector by providing banks with a reliable source of income, thereby enhancing their ability to lend to the private sector.

Namatai Maeresera, a financial analyst, elaborated on this point saying; “A healthy relationship between the Government and banks extends beyond immediate financial stability. It fosters a conducive environment for economic growth by ensuring that the Government can finance its operations and development projects without excessive cost.

“Moreover, it enhances the banking sector’s stability, which is crucial for supporting private sector growth through lending. The spillover effects on employment, infrastructure development and overall economic activity can be substantial.”

The Government’s proactive approach to managing its domestic debt, especially through the timely servicing of Treasury Bills, is a commendable strategy that can strengthen Zimbabwe’s economic foundation.

It reflects a commitment to prudent fiscal management and an understanding of the critical role that financial sector confidence plays in economic stability and growth.

As Zimbabwe navigates its economic challenges, the continued collaboration between the Treasury and banking institutions will be vital. The Government’s demonstrated ability to honour its debt commitments not only stabilises the financial sector but also sets a positive precedent for future fiscal policies.

Ensuring that this relationship remains robust will be key to unlocking sustainable economic growth and development in the country. Recent payments for maturing Treasury Bills highlight a crucial aspect of its economic strategy. Through honouring its obligations, the Government not only reinforces its credibility but also strengthens its relationship with the banking sector.

Such a positive interaction is essential for maintaining financial stability and fostering economic growth, setting the stage for a more resilient and prosperous future.-ebusinessweekly