4 November 2012

Zimbabwe: National Bank to Auction U.S.$30 Million Treasury Bills

THE Reserve Bank of Zimbabwe (RBZ) is set to auction US$30 million Treasury Bills (TBs) on Tuesday in a move that would result in more liquid instruments being used in interbank placements.

The auction of the short-term negotiable instruments issued by the government through the central bank to finance government short-term requirements would be held at the central bank at 10am.

The auction comes more than a week after US$9,85 million was raised from the 91-day paper.

The amount to be raised is double what was intended to be netted last Friday.

Standardbusiness was told on Friday, banks would bid for the paper after getting a tongue-lashing by the monetary authorities last week.

Last week Tuesday banking executives and Treasury heads of banks were summoned to the central bank where they were told to support the TBs.

One foreign bank shunned the TBs at an auction held last Friday, attracting the ire of the monetary authorities.

The bank is sitting on over US$300 million in idle funds, Standardbusiness was told on Friday.

"Banks have been saying that they need TBs and they are in place, but one bank chose not to support them, which is not only unfair but selfishness on the part of that institution," one banker said last week.

"It raises unnecessary pressure on banks."

Indeed pressure was exerted with Youth Development, Indigenisation and Empowerment minister Saviour Kasukuwere saying the banking sector would not be spared from the indigenisation crusade, as it does not want to support the country's economic activities.

"TB (Finance minister Tendai Biti) has failed to raise money from TBs. Where is the supply side? If the supply side couldn't work why didn't it work in terms of the TBs," Kasukuwere questioned in reference to supply side model, seen as an alternative to empowerment in the banking sector.

Although the use of the money raised through TBs could not be established, as Biti's phone went unanswered last week, the Treasury boss told this paper last month that TBs would be used to finance capital projects.

Biti has been under pressure from civil servants who are clamouring for a review of their salaries amid fears he could concede and divert the funds to recurrent expenditure.

Biti said then that Treasury was also mindful of the fact that "one of the things that killed the country is debt and the total absence of fear of contracting debt".

Zimbabwe's total external debt is pegged at well over US$10 billion and the country has no capacity to settle it.

Biti has indicated that revenue generation is unable to meet the country's growing financial needs.

In his mid-term Fiscal Policy review, Biti slashed the 2012 budget to US$3,4 billion from US$4 billion attributed to the underperformance of the diamond revenue, among others.

In a normal economy, all banks work in unison, making it possible for the financial system in the country to operate efficiently.

Banks with excess liquidity assist those in deficit positions using TBs as security. In addition, the central bank, as lender of last resort, accommodates banks in deficit by offering them overnight funds secured by TBs.

Before the return of the TBs, any bank facing liquidity mismatches had to solve the problem alone as the troubled institution would be unable to approach other players due to the absence of security.

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