Business / Economy
Zimbabwe still printing money
13 Apr 2016 at 03:21hrs | Views
Former Finance minister Tendai Biti says government is illegally printing money in the form of Treasury Bills (TBs) to honour its debts.
A TB is a short-term debt obligation backed by a government with a given maturity, in most countries the promissory notes are issued with a maturity of less than one year.
Issued through a country's central bank, TBs commonly pay no explicit interest but are sold at a discount, their yield being the difference between the purchase price and the redemption value.
Biti - who served as Finance minister in the Inclusive Government from 2009 to 2013 - said there was an anomaly with the rampant issuance of TBs which are outlawed to be used as legal tender by private players.
"The government has started the crime of printing money through the issuance of TBs that are now clogging the market. This government has been criminally issuing TBs with total domestic debt now standing at $6 billion," Biti said.
The former Finance minister, who now leads the People's Democratic Party also said the "willy-nilly" issuance of the State Instruments was one of the reasons behind the prevailing tight liquidity conditions.
"The continuance reliance on toxic TBs is a major factor contributing to the current liquidity crisis," Biti said, adding that the situation was also plunging coming governments into debt as some of the instruments mature well into the future.
Zimbabwe's own currency fell victim to hyperinflation forcing government to adopt a basket of nine foreign currencies, including the greenback, the South African Rand, Botswana Pula and Chinese RMB.
Reserve Bank of Zimbabwe governor John Mangudya recently said the country issued two types of TBs, one group used to repay the central bank's debt through the Debt Assumption Act and those used to pay government debt in general.
The central bank has a $1,35 billion debt, due mostly to gold miners, banks and exporters after raiding their foreign currency accounts to fund the cash-strapped government.
In 2014, government issued TBs worth $103 million to repay part of the central bank's debt to banks and farmers which accumulated during the pre-dollarisation period.
State-owned People's Own Savings Bank also announced last week that it had received a $12,8 million capital injection from government in the form of 10-year TBs with a $20 million maturing value.
Finance minister, Patrick Chinamasa, also recently announced that government was looking at the avenue of issuing TBs to pay about 4 000 white commercial farmers who lost their land during the country's controversial land reform programme.
A TB is a short-term debt obligation backed by a government with a given maturity, in most countries the promissory notes are issued with a maturity of less than one year.
Issued through a country's central bank, TBs commonly pay no explicit interest but are sold at a discount, their yield being the difference between the purchase price and the redemption value.
Biti - who served as Finance minister in the Inclusive Government from 2009 to 2013 - said there was an anomaly with the rampant issuance of TBs which are outlawed to be used as legal tender by private players.
"The government has started the crime of printing money through the issuance of TBs that are now clogging the market. This government has been criminally issuing TBs with total domestic debt now standing at $6 billion," Biti said.
The former Finance minister, who now leads the People's Democratic Party also said the "willy-nilly" issuance of the State Instruments was one of the reasons behind the prevailing tight liquidity conditions.
"The continuance reliance on toxic TBs is a major factor contributing to the current liquidity crisis," Biti said, adding that the situation was also plunging coming governments into debt as some of the instruments mature well into the future.
Zimbabwe's own currency fell victim to hyperinflation forcing government to adopt a basket of nine foreign currencies, including the greenback, the South African Rand, Botswana Pula and Chinese RMB.
Reserve Bank of Zimbabwe governor John Mangudya recently said the country issued two types of TBs, one group used to repay the central bank's debt through the Debt Assumption Act and those used to pay government debt in general.
The central bank has a $1,35 billion debt, due mostly to gold miners, banks and exporters after raiding their foreign currency accounts to fund the cash-strapped government.
In 2014, government issued TBs worth $103 million to repay part of the central bank's debt to banks and farmers which accumulated during the pre-dollarisation period.
State-owned People's Own Savings Bank also announced last week that it had received a $12,8 million capital injection from government in the form of 10-year TBs with a $20 million maturing value.
Finance minister, Patrick Chinamasa, also recently announced that government was looking at the avenue of issuing TBs to pay about 4 000 white commercial farmers who lost their land during the country's controversial land reform programme.
Source - dailynews
