Govt restructures US$1bn TBs | Business Times

CLOUDINE MATOLA

The government is facing significant challenges in repaying its maturing US dollar-denominated Treasury Bills (TBs) and is now moving to restructure nearly US$1bn outstanding securities, Business Times can report.

For years, the government has relied on commercial paper to finance its programs. However, its inability to meet TB obligations stems from constrained financial resources, exacerbated by Zimbabwe’s legacy debt.

The country’s outstanding arrears have effectively shut it out of international financial markets, limiting its access to much-needed capital.

According to the Zimbabwe Public Debt Management Office (ZPDMO), which operates under the Ministry of Finance, Economic Development and Investment Promotion headed by Professor Mthuli Ncube,TBs amounting to US$177m matured in the fourth quarter of 2024, with a further US$738m set to mature this year.

This brings the total value of outstanding securities under consideration for restructuring to approximately US$915m.

“The profile of outstanding US dollar-denominated Treasury Bills (TBs) from the last quarter of 2024 through to 2034 reflects significant maturities of US$177m in Q4 2024 and US$738m in 2025,” part of  the latest  ZPDMO report reads.

In response to the mounting obligations, the government is working on a debt restructuring plan to achieve a more manageable repayment schedule and avoid default.

The government’s strategy aims to restructure the maturing TBs to reduce immediate debt servicing costs and improve fiscal sustainability.

The official report notes that the International Monetary Fund (IMF) windfall has already generated an additional US$10m in interest, further tightening the country’s limited fiscal space.

“In this regard, given the constrained fiscal environment, the government is in the process of restructuring these US dollar-denominated TBs. The objective is to bring debt service obligations to sustainable levels while ensuring that essential public services and economic growth are not compromised,” the report reads.

The restructuring will likely involve extending maturities, negotiating lower interest rates, or converting the TBs into longer-term instruments. Analysts suggest that such measures are essential to avert a potential sovereign default and restore investor confidence in Zimbabwe’s financial markets.

In economies with stable macroeconomic fundamentals, TBs are considered risk-free investments, given their government backing and high liquidity. Institutional investors and pension funds often prefer them as a safe haven for capital preservation.

However, Zimbabwe’s economic instability, rising inflation, and restricted access to international credit markets have undermined confidence in government securities.

The inability to honour TB repayments on time raises concerns about fiscal mismanagement and the government’s creditworthiness.

Financial analysts warn that continued defaults or forced restructuring of TBs could trigger a wider loss of investor confidence.

Market participants will likely demand higher yields on future government borrowings, further increasing the cost of debt servicing.

Local financial institutions, which hold a significant portion of these securities, may also face liquidity challenges, impacting the broader financial system.

If commercial banks and pension funds absorb excessive losses due to government defaults, credit contraction and reduced private sector lending could follow, slowing economic growth.

To restore fiscal stability, Zimbabwe must undertake broader economic and debt reforms beyond just restructuring TBs. The government may need to engage multilateral lenders such as the IMF and the World Bank to negotiate a comprehensive debt relief program. However, this would require implementing structural reforms, including enhancing transparency, reducing fiscal deficits, and improving revenue collection mechanisms.

While debt restructuring may provide short-term relief, without broader reforms, Zimbabwe risks entering a cycle of repeated defaults and deepening economic uncertainty.

The government’s plan to restructure nearly US$1bn in TBs highlights the fragile state of Zimbabwe’s public finances.

The success of this strategy will depend on how well the government manages investor expectations, executes fiscal discipline, and navigates negotiations with creditors.

Failure to implement a credible restructuring plan could lead to higher borrowing costs, investor flight, and a deeper financial crisis, further straining an already fragile economy.

The coming months will be critical in determining Zimbabwe’s fiscal trajectory and overall economic stability.

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