eBusiness Weekly
Martin Kadzere
Business Writer
Zimbabwe has started issuing US dollar-denominated Treasury Bills (TBs) to corporates as compensation for outstanding blocked funds, people familiar with the matter said.
The first batch of zero-coupon TBs worth nearly US$50 million will be issued to about 10 companies at different maturity periods ranging from three years to 12 years, a senior official with the Reserve Bank of Zimbabwe (RBZ) told Business Weekly.
“The Treasury Bills are tradable and have prescribed asset status,” the official, who declined to be identified, because he is not authorised to talk to the media, said.
Calls seeking comment from central bank governor Dr John Mangudya and Finance and Economic Development Minister Professor Mthuli Ncube were not answered.
But an official with the Finance Ministry confirmed “a directive was recently” given to the RBZ to issue the Treasury Bills and “more will be issued soon.”
In July 2019, after the introduction of the interbank rate and conversion of bank balances to Zimbabwean dollars, the central bank assumed the foreign debts of some corporates.
The funds relate to external obligations that could not be remitted between January 2016 and February 2019 due to foreign currency shortages.
The debt was assumed on the condition that corporates would surrender their Zimdollar balances at 1:1.
This occurred about five months after the interbank market, which started with an opening exchange rate of 2.5/US$1 on February 22, 2019, had been introduced. As a result, the debts were assumed at a lower rate than what was prevailing at the time.
Early this year, the Government released 580 names of companies and individuals whose funds could not be repatriated out of the country, with CBZ emerging as the most exposed entity.
The list of companies, mainly in the banking sector, the aviation industry, petroleum and manufacturing, in general, are contained in Act Number 7 of the 2021 Finance Act.
According to the Act, the Government is liable for a total of US$2,5 billion for funds belonging to foreign counterparties that provided loans and credit facilities to “a person resident in Zimbabwe and was entitled to such payment”, but could not be paid when the funds were due.
“It states that any liability payable in foreign currency that was incurred by any of the persons specified in the Act before February 22, 2019, and in respect of which such foreign currency could not be repatriated from Zimbabwe shall constitute blocked funds qualifying for relief.
Such persons must have submitted their claims on or before April 30, 2020, for validation of their claims by the RBZ; and the equivalent, in Zimbabwe dollars, of the blocked funds forming the basis of the claim, must have been remitted to the central bank.
“Unfair subsidies”
Financial analyst Brains Muchemwa said while the Government was following up on its promise to honour the legacy debts, the underlying principle of having the public, through the Government, having to subsidise private capital and insulate them from exchange rate losses was “fatally wrong.”
Muchemwa said local businesses, pension funds and individuals had to contend with losing value when the 1:1 was disbanded.
