THE Reserve Bank of Zimbabwe (RBZ), battling to save face after failing to handle the serious cash shortages, last week rejected all bids for the 91-day Treasury Bill ten
The Treasury Bill tender was for $2 billion and was held on Thursday.
Analysts contacted yesterday said the RBZ had rejected the bids because the rates being offered were too high.
The move comes at a time when Zimbabwe’s domestic debt, which stood at $346 billion in December last year, rose dramatically to $546 billion as at June 30.
Bankers say with Treasury Bills accounting for 96% (about $491 billion) of the debt, interest costs are likely to continue to be a burden on the fiscus.
They said the increased borrowing had tied up a high percentage of the nation’s savings.
“In its efforts to keep rates low, the central bank is refusing to accept high bids and ironically refusing to give banks overnight accommodation, which has had the effect of raising interest rates as the banks have been forced to seek funds from the open market,” a Barnfords Securities (Pvt) Ltd financial analyst said.
The money market has continued to be short and with overnight ratios firming significantly to levels between 93% and 110%.
The 90-day NCD rate on September 5 stood at 82% but increased to 95% on Friday last week.
The 90-day bank acceptance yield rate increased from 80% to 95,05%, while the call rate shot up from 80% to 92% and the interbank overnight rate from 85% to 105% during the same period respectively.
Economist John Robertson said this was not the first time the RBZ had rejected Treasury Bills.
In fact, he said, this was now the norm because of the prevailing hyperinflationary environment in Zimbabwe.
The country’s inflation has soared from 200% at the beginning of the year to 426,6% for August.
Economists predict it will continue skyrocketing to hit the 1 000% mark by year-end.
Zimbabwe is however, surrounded by neighbours with single digit inflation figures.
Its largest trading partner South Africa has an inflation rate of 5,7%, Botswana 8,3%, Tanzania 4,4%, and Zambia 20,3%.
“The RBZ has been rejecting Treasury Bill tenders for most of the year,” Robertson told businessdigest.
“Corporates are looking for higher margin levels while the central bank is only prepared to offer low rates. I guess because they are the government they can decide to offer whatever they want. Imagine what would happen if you and me asked for our own rates when applying for a mortgage.”
He said the RBZ was only prepared to pay the least rate because of the spiraling domestic debt.
“The government has the law in their own hands and can, therefore, dictate whatever they want,” Robertson said
Bankers said the domestic debt was expected to rise further during the second half of the year due to the necessity to fund grain imports and to provide financial support for newly-resettled farmers.