FINANCE and Economic Development Minister Professor Mthuli Ncube said the Treasury will issue US $ 100 million in government bonds on the Victoria Falls Stock Exchange (VFEX) denominated in US dollars in the first quarter 2022 in the context of deficit financing.
VFEX is a subsidiary of the Zimbabwe Stock Exchange (ZSE), launched late last year as part of efforts to attract global capital, while helping to restore foreign investor confidence in the country’s capital markets. Zimbabwe and helping businesses raise capital in foreign currencies.
In its 2022 national budget, Mthuli said the bonds will be issued to lower the cost of borrowing and deepen capital markets, with a particular focus on developing the Victoria Falls Offshore Financial Services Center aimed at attracting foreign capital.
“The bonds will be issued to supplement government resources needed for road rehabilitation, modernization and equipping of public health facilities, as well as investment in irrigation infrastructure,” he said. .
The minister said the gross financing requirement for 2022 is projected at $ 146.8 billion, which will be financed through the issuance of government securities, the use of
Allocation of SDRs and disbursements of external loans.
The country received the equivalent of $ 961 million in Special Drawing Rights (SDRs) from the International Monetary Fund, part of the $ 650 billion the IMF distributes to its members.
Regarding domestic borrowing, he said the government will continue to issue treasury bills through the auction system at competitive prices, as well as to improve accountability and transparency.
“The expected stable macroeconomic environment should encourage the adoption of medium and long term government securities by investors,” Mthuli said.
He noted that the government has appointed the Infrastructure Development Bank of Zimbabwe (IDBZ) and the African Import-Export Bank (Afreximbank) as joint lead / financial advisers for the US dollar bond.
“To improve the credit structure of US dollar-denominated government bonds, the Treasury will establish a dedicated sinking fund to constrain identified carbon tax revenue streams for the repayment of the US dollar government bond,” said the Minister of Finance.
In addition, he said that the Treasury also requested a payment guarantee from Afreximbank as Afreximbank has a favorable credit rating of “BBB”, offers a wide range of trade finance programs, guarantee products and sovereign and corporate advisory services that support the expansion, diversification, promotion and development of intra-African trade and access to African trade, capital and capital markets.
Mthuli said that, aware of the legal borrowing requirements, the current high debt distress, and the debt sustainability analysis under National Development Strategy 1 (NDS1), the overall annual borrowing limit for 2022 is set at 5.75% of the gross domestic product (GDP), which is derived from the financing needs of the budget deficit, the amortization of loans and securities and the financing of projects of public entities.