Ultimatum for banks

US$30 million worth of 91-day TBs, in the hope of a better response from banks after a futile attempt and partial success in the second attempt.
“I am giving the banking sector the last chance to fully support the Treasury Bills. If they don’t support them, I will issue NCDs — and that’s it,” he said.
Reserve Bank governor Dr Gideon Gono last month warned the banks that authorities would take “strong measures” to elicit support from them for the TBs. This was after a lukewarm response to the first issue of US$15 million that attracted subscriptions of just above 50 percent. All bids were rejected.
“The US$15 million T-Bills issue was undersub­scribed and even that which came through did so at rates we do not believe are reflective of the risk factors attached to the paper that was on offer,” he said then.
“Furthermore, we are disappointed by the double standards displayed by some of the market players who had been in the forefront of lobbying for the issuance of the paper, only to show their true colours at the critical moment of reckoning.
“Against such a background, both Treasury and monetary authorities were united in our decision to reject the bids in their totality. We will be returning to the market soon with measures that will see both Trea­sury and monetary authorities achieving earlier objec­tives through a battery of other instruments crafted to adequately deal with the market failures of the nature we all witnessed.”
This is the first time the central bank has floated the Government paper since 2008, shortly before the coun­try abandoned its currency in favour of the multicur­rency regime.
While Treasury has not indicated where the pro­ceeds from the TBs would be used for, Government has been battling to secure funding for key projects such as infrastructure rehabilitation and support to agriculture due to pressure on the Budget.
It was expected that the success of the TBs would help revive the country’s dormant interbank market, which has seen banks being reluctant to cover each other’s daily shortfalls.
Zimbabwe lacks a standard benchmark interest rate. The weighted average lending rate for private banks ranged from 14 percent to 20 percent in the four months through to July 31, according to the Mid-Year Monetary Policy Statement.