AMA in bid to raise US$100m for farmers

season through the issuance of 360-day agro bills.
The bills are part of the Government’s efforts to unlock additional funding by the private sector to meet some of the financing gaps identified in the current agricultural season. AMA has issued the bills on behalf of the Government who are the guarantors, and CBZ Bank, the financial advisors.
In a statement issued on Friday, CBZ Bank invited pension and provident funds, insurance companies, life mutuals, commercial banks and other interested institutions, as well as individuals, to subscribe to the bills.
Applications would be for a minimum of US$10 000 and the interest rate would be on tender basis.
In his 2012 National Budget statement Finance Minister Tendai Biti said Government was going to put up “sweeteners” to the bills to ensure full subscription.
Government has thus granted the bills special features, which include prescribed asset status, liquid asset status and tax exemption status.
Liquid asset status means holders of the papers can borrow from the central bank overnight while prescribed assets allows pension funds and insurance companies to invest in Government portfolios. The bills also have a tax exemption status, which means all investors will receive their money in full without paying any taxes. These are the first bills to be granted special features since dollarisation in February 2009 in a bid to increase subscription.
Against this background subscription for these bills is expected to surpass previous exercises.
Last month, AMA was on the market to raise US$20 million for soyabeans production and only managed to raise US$4,5 million as investors were bidding for higher rates. The 270-day bills had total bids amounting to US$17,6 million – an indication that the market is still squeezed of cash.
Bills are money market instruments used to raise funding.
The money market has remained depressed due to lack of instruments, poor liquidity and reduced confidence.
Zimbabwe faces a serious liquidity crisis following a decade of economic instability, which saw its Gross Domestic Product shrink by about 50 percent.
This has been compounded by limited foreign capital inflows over a perceived country risk profile. The liquidity crisis has resulted in the high cost of finance.
With the central bank not well funded, financial intermediation by banks has suffered since the Reserve Bank does not have the capacity for lender of last resort.
Government is also planning to capacitate the central bank as the lender of the last resort through a US$100 million fund.