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US$100m Govt bond to hit market by December

by Staff reporter
23 Sep 2022 at 05:49hrs | Views
THE Government will launch the US$100 million bond on the Victoria Falls Stock Exchange (VFEX) by the end of this year to mobilise more resources for critical public infrastructural development projects across the country.

VFEX is a subsidiary of the Zimbabwe Stock Exchange established to kick start the Offshore Financial Services Centre (OFSC), which is earmarked for the special economic zone in Victoria Falls, the country's prime tourism hub.

The exchange was established in 2020. Its trading currency is in United States dollars.

The Second Republic has prioritised infrastructure development in rebuilding the economy. Among the targeted infrastructure projects are roads, dams, education and health institutions, public administration and local authority offices.

After nearly two decades of stagnation, Zimbabwe's economic recovery is benefiting immensely from the Government's massive public infrastructure development projects such as trunk roads rehabilitation and dam construction.

In a recent interview, Finance and Economic Development Professor Mthuli Ncube said the guarantor for the bond had approved a support structure for the fund to improve the credit standing of the facility and lower the risk profile.

"Investors should be happy with that. That approval process is now going to its final phase, so we expect that certainly by year-end that bond will be launched and we will be able to raise US$100 million," he said.

Sometime this year, Prof Ncube attended a meeting with international investors in Washington DC where he invited global investors to participate in the US$100 million VFEX bond.

 "This is only just the beginning and going forward Government will be launching additional bonds but also we expect other public sector entities to do the same on the back of a Government guarantee.

"We just need the Government to make this initial move and then the rest will follow so that overtime we then build a yield curve for bonds that are traded on VFEX in US dollars," he said.

In the 2022 national budget, Prof Ncube said the bond would be issued to reduce the costs of borrowing and develop capital markets to create an offshore financial services centre in Victoria Falls and attract more investors from the globe.

In the budget, the Treasury has allocated $334,7 billion for capital projects that include infrastructure.

As of June, a total of $141,4 billion of the money had been used and the Government has pledged $172,6 billion more during the second half of the year taking the total allocation to above $500 billion.

In the six months to June 2022, a total of $8 billion was targeted at dam construction, procurement of drilling rigs and borehole drilling.

Priority was on sustaining ongoing projects such as the Gwayi-Shangani and Chivhu dams. Gwayi-Shangani dam was now at around 75 percent completion.

Source - The Herald