GOVERNMENT has issued yet another $300 million Treasury Bill (TB) tender to mobilise funds for its programmes, a development likely to further increase money supply in the market.

With government planning on increasing its expenditure by nearly 143% to $63,6 billion next year from an estimated $26,2 billion this year, Treasury is under pressure to fund its budget as it aims for a 3% recovery growth next year.

The latest TB tender is the 10th to be issued ever since the re-introduction of the TB auction system with an estimated $1,7 billion tendered from July to date.

“The Reserve Bank of Zimbabwe (RBZ) on behalf of the government of Zimbabwe hereby invites commercial banks, building societies, Peoples Own Savings Bank and Infrastructure Development Bank of Zimbabwe to subscribe to a government Treasury Bill tender amounting to three hundred million dollars
($300 000 000),” part of the RBZ notice reads.

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Applications must be for a minimum amount of $1 million, with the number of bids per investor restricted to two.

The offer opens today.

However, this has raised fears that the increase in TB issuances could increase domestic debt from just under $8 billion.

Government has used TBs and the RBZ’s overdraft facility to fund its ballooning expenditure which has increased domestic debt.

From 2016 to 2018, TBs grew to nearly US$8 billion during the multi-currency regime, at least 85% of the domestic debt of US$9,6 billion debt as at the end of last year.

After government reintroduced the Zimbabwe dollar as the sole legal tender in June, the authorities effectively wiped about US$7 billion through the conversion of the United States dollar debt into the local currency.

Financial expert Persistence Gwanyanya said: “Government is already in deficit on its 2020 budget and it has created an overdraft window to the RBZ. If the TBs will not be able to cover the debt, then the government is in trouble because the debt will be out of control. Government will then be forced to print more money, then that’s when the money supply will increase.

“If the $2 billion matures, they will be rolling over the maturing bill and it has no significant impact on inflation. These TBs only have impact on the government’s debt. What needs to be done is to manage the money supply against the debt government has.”

Despite the central bank moving to an auction system for TBs to control their issuance, most of these auctions have been held in secrecy.

Research economist Prosper Chitambara warned government to exercise discipline in the issuance of TBs to avoid increasing money supply which might lead to another episode of hyperinflation when the economy is set to contract.