THE Infrastructure Development Bank of Zimbabwe (IDBZ) will engage strategic partners in the Sadc region, in a bid to revive the infrastructure bond capital market, a senior official with the bank said last week.
IDBZ projects coordinator for the infrastructure projects division, Nick Nyamambi said it was important for regional players to promote the development of an effective bond market, with highly liquid government bonds as a precursor for other private sector bonds.
"For bonds to flourish, there is need for a sufficiently wide market with a variety of instruments available," said Nyamambi. "The bank will continue to engage all stakeholders in working towards reviving the once vibrant bond capital market."
Estimates indicate Zimbabwe's infrastructure requires an estimated US$16 billion for rehabilitation and upgrading roads, airports, railways, power grids, bridges and various related networks.
The IDBZ recently took the initiative to revive the bonds market by issuing the maiden infrastructure development bond, the proceeds of which were advanced to the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) for the prepaid meter project.
Nyamambi said that the bank would engage strategic partners within the region, such as the Development Bank of Southern Africa and other development finance institutions.
"There is need for a move towards a more regional capital market for the benefit of both governments and the private sector borrowers seeking to raise capital," he said.
Nyamambi said that the sizes of individual economies however, tended to limit the extent of capital markets development and hence the need for an integrated regional capital market.
Infrastructure bonds are a form of debt investment issued by national governments to investors to assist in funding projects aimed at improving the infrastructure of a country.
Investors buy infrastructure bonds for a set price and are entitled to receive regular interest payments, as well as a return of the principal of the bonds.
Governments usually pay back the debt on the bonds through fees generated by the new projects funded by the bonds.
Experts note that efficient capital markets are important and integral to infrastructure development with regard to raising of long-term funding.
The benefits of well-developed capital markets include higher levels of capital growth, direct access by borrowers of funds to multiple investors, effective allocation of funds and the attraction of long term finance ideal for infrastructure development.
Government previously noted that infrastructure funding requirements could not be met from the current levels of fiscal revenues, given the disproportionate demands on government arising from both discretionary and non-discretionary recurrent expenditures.
Local economists said institutional liquidity may serve as the main impeding factor towards uptake of the bonds.
The bank is already involved in a project on the Beitbridge-Chirundu road, which entails the upgrading, improvement and tolling of the highway at an estimated cost of US$1 billion.
Standard Bank's Africa strategist, Yvette Babb said there was discussion taking place, to determine how regional entities and the public sector can play a role in driving infrastructure development in Zimbabwe.
"The problem is to do with the fiscal accounts of the government, which implies it does not have funds at its disposal to drive investment in infrastructure," she said.
Recurrent expenditure has consumed most of government's budget, leaving very little funds to the public entities' availability to further rehabilitate infrastructure development.
She reiterated the need for more private sector involvement in infrastructure projects.