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The Zimbabwe Stock Exchange (ZSE) has said participation by the Government on the bond market will ensure transparency in the process through which the State raises funding for its programmes while this would also boost confidence in the capital markets.
This comes as the Government intends to issue US$100 million worth of Government bonds on the US dollar-denominated exchange, the Victoria Fall Stock Exchange (VFEX) this year as part of deficit financing.
The bond market (also debt market or credit market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market.This is usually in the form of bonds, but it may include notes, bills, and so on for public and private expenditures.
Finance and Economic Development Minister Professor Mthuli Ncube in the 2022 National Budget said the bonds would be issued to reduce the cost of borrowing and deepen the domestic capital markets, with a particular objective of developing the Victoria Falls Offshore Financial Services Centre aimed at attracting foreign capital.
ZSE chief executive, Justin Bgoni, said other exchanges in the region like Zambia, Botswana and even up to Rwanda, in terms of the bond market, the governments are playing a very big role.
‘Everyone would want the Government to be transparent in terms of the money they are raising as the more they come to the capital markets to raise money, the more transparency it is going to be.
“We are encouraged that the Government is going to do what other governments have been doing, which is come to the market to raise money,” he said at a Zimbabwe Annual Investor Forum held in Harare.
Zimbabwe has scored fairly well on budget transparency with the country scoring 59 out of 100 in the 2021 International Budget Partnership Open Budget Survey (OBS), up from 49 out of 100 in 2019.
The country is now ranked number three in Africa after South Africa and Benin and number 41 out of 120 countries surveyed in 2021.
Mr Bgoni said what was needed in the market aws a proper set of benchmarks for interest rates which will boost confidence.
“For example, if we take the infrastructure bond, it will be a long term asset and for them to raise a bond like that we feel it will be oversubscribed,” said Mr Bgoni.
He indicated that there is a lot of money in the market just sitting and not generating any return.
The Government has previously floated bonds to support agriculture such as the Irrigation Infrastructure Bond aimed at raising funds to support irrigation development and infrastructure under the Command Agriculture programme.
The bonds are usually granted prescribed asset status, Liquid Asset Status, Tradability, and Tax Exempt status.
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