adminPresenting the Mid-Term Fiscal Policy Review on Tuesday the Finance Minister Tendai Biti projected a deficit of about US$700 million largely attributable to an inflated wage bill, meaning the Government is constrained in meeting some key economic targets.
To this extent observers have called for the Government to issue money market debt instruments.
“The Government has identified imminent budgetary financing requirements, cumulatively in excess of US$700 million additional financing is required, including for drought mitigation.
“It also seeks to isolate some revenue streams, principally from diamonds export.
“In view of the foregoing, Government can actually securitise part of the expected future diamonds revenue streams and issue Treasury bills backed by those revenue streams,” said one analyst.
He said the Treasury instruments could be structured in different maturity profiles – six months, nine months or one-year bills, of which the borrowing instruments can raise money for expenditure programmes.
The analyst said such an approach would allow the Government to address several challenges at the same time.
“Issuance of such instruments raises money that can be used to pay farmers immediately, to allow them to prepare for the summer season that is fast approaching.
“Government has yet to pay the Grain Marketing Board about US$20 million for maize already delivered, and more maize is yet to be delivered for the strategic grain reserves. Issuance of Treasury instruments create a portfolio that can be traded in the interbank and also as security for enhanced interbank lending.
“Appropriately priced, such instruments can guide the market in terms of the levels of interest rates in the economy.
“The portfolio would also deepen capital markets,” he said.
Peter Tanyanyiwa
Online Reporter