Local finance institutions are scrambling to invest in Treasury Bills as the most sought after safety net for deposits amid constant shocks within the economy, 263Chat Business has established.
Treasury Bills (TBs) are debt instruments government uses to raise funds from suitors for various short-to medium term projects.
This week, government issued TBs worth ZWL$30 million under the newly introduced auction system and it received overwhelming interest from local financial institutions.
Figures released by the Reserve Bank of Zimbabwe reflect that of the ZWL$ 30 million worth of TBs Treasury were issued this week; with total bids by local financial institutions reaching ZWL$ 132.7 million at an average rate of 15.6 percent.
“What this tells us is that lending to individuals or companies right now is not attractive in this inflationary environment hence TBs with a coupon rate of at least 15 percent become very attractive,” economic analyst, Pepukai Chivore told 263Chat Business.
“However the unfortunate outcome is that, this is elbowing out other borrowers from the limited pool,” added Chivore.
Most companies in productive sectors are in distress and in need of recapitalization in order to operate efficiently.
However, most banks are reluctant to risk deposits at a time productivity in most companies is relatively low.
This week’s auction of TBs is the first since 2012 and has been widely applauded by experts as it gives Treasury a competitive price.
Prior to this, Government has been issuing TBs at a private placement basis were investors were assuming TBs privately at much compromised value.
“Directly conducting private investors to take up TBs to raise funds has created problems in the past. This has in the past increased bank debt and created inflationary pressures,” added Chivore.
Recently, Finance and Economic Development Minister Mthuli Ncube advised that Treasury will no longer dwell on debt instruments such as TBs to raise resources for various programs but in the event it does as a matter of emergency, it will be using an auctioning based system to derive a more competitive rate for its paper.