Zimbabwe to borrow $147 billion in 2022

Finance and Economic Development Minister, Professor Mthuli Ncube, says the Treasury will borrow $146,8 billion using Treasury Bills (TBs) and Treasury Bonds in 2022 to finance key Government projects.

"The 2022 gross financing requirement is projected at $146,8 billion, which will be sourced through issuance of Government securities," the Minister said.

Of the TBs to be issued, $8,7 billion will be for 180-day tenure, with the 270-days TBs worth 32,9 billion being issued in 2022. A total of $32,4 billion will be borrowed through the 360-day paper.

The borrowing will be done quarterly with the 180-day bills being offered in the first and fourth quarter alone, whilst the other papers will be issued every quarter.

"On domestic borrowing, the Government will continue to issue Treasury Bills through the Auction System for competitive pricing, as well as to improve accountability and transparency.

"The projected stable macroeconomic environment, characterised by low stable inflation, as well as stable exchange rate is expected to spur the uptake of medium to long-term Government securities by investors," Minister Ncube told lawmakers on Thursday.

The Reserve Bank of Zimbabwe (RBZ) in September 2019 returned to the capital market with more TBs to raise funds for Government operations.

With no budgetary support, the Government's appetite for the debt instruments has increased over the past few years.

The Treasury said in 2022, they will issue Treasury Bonds with a tenure ranging from 2 years to 7 years, worth US$100 million on the United States dollar-denominated Victoria Falls Stock Exchange (VFEX) during the first quarter of 2022 as part of deficit financing.

VFEX is a subsidiary of the Zimbabwe Stock Exchange (ZSE), launched late last year as part of efforts to attract global capital, while helping to restore foreign investor confidence in Zimbabwe's capital markets and help companies raise capital in foreign currency.

In his 2022 National Budget, Minister Ncube said the bonds will be issued to reduce the cost of borrowing and deepen the capital markets, with a particular objective of developing the Victoria Falls Offshore Financial Services Centre aimed at attracting foreign capital.

"As part of deficit financing, the Government will issue 7-year US$ denominated Treasury bonds of up to US$100 million, to be listed on the Victoria Falls Securities Exchange (VFEX) during the first quarter of 2022, earmarked for specific priority infrastructure projects.

"Government has appointed the Infrastructure Development Bank of Zimbabwe (IDBZ) and African Export- Import Bank (Afreximbank) as the joint lead arrangers/financial advisors," the minister.

The Treasury said in order to enhance the credit structure of the US dollar denominated Government bonds, it would establish a dedicated sinking fund to ring-fence the identified carbon tax revenue streams for repayment of the US$ Government bond.

"The bonds will be issued to complement Government resources needed for the rehabilitation of roads, upgrading and equipping public healthcare facilities, as well as for investments in irrigation infrastructure," he said.

Said Minister Ncube cognisant of the statutory borrowing requirements, the current high debt overhang and debt sustainability analysis under the National Development Strategy 1 (NDS1), the 2022 overall annual borrowing limit had been set at 5,75 percent of the Gross Domestic Product (GDP), which is derived from the budget deficit financing requirements, amortisation of loans and securities and public entities project financing.