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Zimbabwe central bank raises ZWG$5.9 billion via treasury bills
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The Reserve Bank of Zimbabwe (RBZ) has raised ZWG$5.9 billion through Treasury Bill (TB) issuances and private placements in 2024, as the government intensifies its domestic borrowing to fund operations, manage liquidity, and meet rising public wage demands. This surge in local debt issuance comes amid Zimbabwe's worsening external debt crisis and continued exclusion from international capital markets.
RBZ Governor Dr. John Mushayavanhu highlighted the crucial role of Treasury Bills in stabilising the economy during a volatile period. "The Reserve Bank, acting as the government's agent, managed to raise ZWG$5.9 billion through Treasury Bill auctions and private placements in 2024," he said. "These instruments remain key in managing liquidity and guiding interest rate policy."
In May alone, Treasury Bills worth ZWG$380 million were floated with an average yield of 20.2105%, reflecting the central bank's ongoing use of TBs to mop up excess liquidity and steer short-term interest rates. "TB issuance is a key tool for the RBZ to manage the money supply and influence interest rates in the economy," Mushayavanhu added. "The absorption or release of liquidity through TBs significantly affects financial system stability."
However, Zimbabwe's Treasury Bills carry a troubled legacy. Past defaults on maturing instruments have eroded investor confidence and exposed structural weaknesses in public debt management. During the peak of Zimbabwe's fiscal crisis, excessive TB issuance-often financed via central bank overdrafts-contributed to hyperinflation and a widespread loss of trust in government-issued debt.
With ongoing sanctions, ballooning external arrears, and economic mismanagement shutting Zimbabwe out of international capital markets, the government has increasingly depended on domestic borrowing. This reliance has fueled recurrent budget deficits financed through TBs and RBZ overdrafts, intensifying inflationary pressures and macroeconomic instability.
New challenges are emerging as Zimbabwe struggles to meet obligations on maturing U.S. dollar-denominated TBs. The government is currently restructuring nearly US$1 billion in outstanding securities, with legacy debt estimated at US$21 billion continuing to weigh heavily on the economy.
According to the Zimbabwe Public Debt Management Office (ZPDMO), TBs worth US$177 million matured in the fourth quarter of 2024, while another US$738 million is set to mature in 2025, bringing total exposure under review to approximately US$915 million.
In response, the Treasury is developing a debt restructuring plan that may include extending maturity profiles, reducing coupon payments, or converting short-term TBs into longer-term instruments. While these steps may provide temporary relief, analysts warn of deeper risks should restructuring fail.
"A forced restructuring or default on TBs could lead to a broader loss of investor confidence," an analyst told Business Times. "Future government debt may require significantly higher interest rates, raising borrowing costs and constraining fiscal space."
Banks, as major holders of government securities, could face liquidity pressures if repayments are delayed or reduced, potentially tightening credit supply to the private sector and slowing economic recovery. Institutional investors, including pension funds, also risk losses that could reverberate through the financial system.
Experts caution that Treasury Bill restructuring alone is insufficient to restore stability. Zimbabwe requires a comprehensive reform package, including engagement with multilateral creditors and international financial institutions.
"Resolving the TB issue alone is insufficient," noted an economist. "The government must undertake broader economic reforms and engage with the IMF and World Bank to negotiate debt relief and secure new financing."
Ultimately, experts agree that Zimbabwe's path to debt sustainability and economic recovery depends on renewed fiscal discipline, rebuilding market confidence in government debt, and unlocking access to concessional international funding.
RBZ Governor Dr. John Mushayavanhu highlighted the crucial role of Treasury Bills in stabilising the economy during a volatile period. "The Reserve Bank, acting as the government's agent, managed to raise ZWG$5.9 billion through Treasury Bill auctions and private placements in 2024," he said. "These instruments remain key in managing liquidity and guiding interest rate policy."
In May alone, Treasury Bills worth ZWG$380 million were floated with an average yield of 20.2105%, reflecting the central bank's ongoing use of TBs to mop up excess liquidity and steer short-term interest rates. "TB issuance is a key tool for the RBZ to manage the money supply and influence interest rates in the economy," Mushayavanhu added. "The absorption or release of liquidity through TBs significantly affects financial system stability."
However, Zimbabwe's Treasury Bills carry a troubled legacy. Past defaults on maturing instruments have eroded investor confidence and exposed structural weaknesses in public debt management. During the peak of Zimbabwe's fiscal crisis, excessive TB issuance-often financed via central bank overdrafts-contributed to hyperinflation and a widespread loss of trust in government-issued debt.
With ongoing sanctions, ballooning external arrears, and economic mismanagement shutting Zimbabwe out of international capital markets, the government has increasingly depended on domestic borrowing. This reliance has fueled recurrent budget deficits financed through TBs and RBZ overdrafts, intensifying inflationary pressures and macroeconomic instability.
New challenges are emerging as Zimbabwe struggles to meet obligations on maturing U.S. dollar-denominated TBs. The government is currently restructuring nearly US$1 billion in outstanding securities, with legacy debt estimated at US$21 billion continuing to weigh heavily on the economy.
According to the Zimbabwe Public Debt Management Office (ZPDMO), TBs worth US$177 million matured in the fourth quarter of 2024, while another US$738 million is set to mature in 2025, bringing total exposure under review to approximately US$915 million.
In response, the Treasury is developing a debt restructuring plan that may include extending maturity profiles, reducing coupon payments, or converting short-term TBs into longer-term instruments. While these steps may provide temporary relief, analysts warn of deeper risks should restructuring fail.
"A forced restructuring or default on TBs could lead to a broader loss of investor confidence," an analyst told Business Times. "Future government debt may require significantly higher interest rates, raising borrowing costs and constraining fiscal space."
Banks, as major holders of government securities, could face liquidity pressures if repayments are delayed or reduced, potentially tightening credit supply to the private sector and slowing economic recovery. Institutional investors, including pension funds, also risk losses that could reverberate through the financial system.
Experts caution that Treasury Bill restructuring alone is insufficient to restore stability. Zimbabwe requires a comprehensive reform package, including engagement with multilateral creditors and international financial institutions.
"Resolving the TB issue alone is insufficient," noted an economist. "The government must undertake broader economic reforms and engage with the IMF and World Bank to negotiate debt relief and secure new financing."
Ultimately, experts agree that Zimbabwe's path to debt sustainability and economic recovery depends on renewed fiscal discipline, rebuilding market confidence in government debt, and unlocking access to concessional international funding.
Source - Business Times
