Another treasury bill issue has faced a resistant market. Just days after Finance minister Professor Mthuli Ncube stood before the nation and said the government would move to a cash budgeting basis and assuring the nation that this was possible because the government had ZWL$3 billion in cash, the government went to the market to borrow. The government sought ZWL$200 million but the market was not forthcoming with only ZWL$95 million being realised. This is in stark contrast to the first auction of the year which was oversubscribed.
Notable was the purpose of the treasury bill issue was the purpose was not the evergreen “government programmes” but specifically stated agriculture financing. The ZWL$200 million was sought on a 180-day duration. The results are quite damming for the government. With only ZWL$130 million worth of treasury bills bid for and ZWL$95 million of that deemed acceptable. Perhaps coincidentally the Reserve Bank released a press statement advising tobacco farmers on payment arrangements for the 2020 marketing season.
Mthuli Ncube has over his tenure been responsible for many statements which have not quite added up. In 2019, after the introduction of Intermediated Money Transfer Tax (2% tax), the minister boasted of the surplus that government was recording. Only to turn around a few months later and reinstate the once-abandoned treasury bill auctions. “Where is the surplus” people asked. The same question begs of the current treasury bill issue.
The results are disappointing and will give the finance ministry and Reserve Bank a little to think about. With inflation rampaging and last month implied at 540% the government would have to look at shorter duration bills. Something they seemed to have learnt last year when 365 and 272-day bills proved unpopular and they reduced durations to 180 days. With inflation only projected to get worse because of the massive uptick in the foreign currency parallel market exchange rate which pricing of most goods is based on longer duration lending is less reliable even with government guarantees.
The ride is not going to get easier for the government of Zimbabwe with their grandiose announcements and failure to deliver. In the recent statement that sought to liberalise the foreign currency interbank market Zimbabweans were promised an electronic Reuters based trading system that was ready to start operations on the 12th of March. Neither the interbank exchange rate nor the way it is reported has changed. It’s back to the drawing board on the financing front. They did announce a new format for Treasury Bill auctions which will feature a calendar that plans auctions in advance.