Zimbabwe banks pile up on government paper as private sector gets squeezed out

Zimbabwean banks have significantly increased their holdings of treasury bills (TBs) by 87 percent in the six months to June, results from reporting banks show, as government continues to dominate borrowing at the expense of productive sectors of the economy.

Statistics from the central bank show that the amount of TBs held by different institutions in the market, largely banks, increased by 20.25 percent to $2.5 billion as at June 30 from $2,079 billion held as at December 31, 2016.

Of the total TBs held in the market as at 30 June, $843.2 million (representing 33.7 percent) were issued to finance government expenditure.

This shows that treasury bills issued for government budgetary support increased by 87 percent in only six months from $450 million in December 2016.

Zimbabwe government turns to borrow money from the domestic economy as its revenue collection fall short to cover expenditure, owing to a poor performing economy and inability to receive financial assistance from multilateral lenders due to its huge debt overhang.

This explains why on average, a sample of largest banks by asset base, that have reported their half year financial results show that their holdings of treasury bills have increased by 33.64 percent compared to the same period last year while loan and advances to productive sectors of the economy have on average slightly increased by 0.52 percent.

The sample includes Barclays Bank Zimbabwe whose loan and advances have decreased by 10.27 percent to $113.5 million, while TBs holding has increased more than 8 times to $ 57.9 million from $ 6.7 million held in the comparable period last year, representing 12 percent of total assets.

For CBZ, while loan and advances have increased by 4.23 percent to $911 million, TBs holding has increased by 8.36 percent to $814.5 million from $751.6 million held in the comparable period last year, representing 41.4 percent of its total assets.

Additionally, for CABS, while loan and advances have increased by 11.53 percent to $594.33 million, TBs holding has increased by 48.8 percent to $131.57 million from $88.42 million held in the comparable period last year, representing 12.23 percent of total assets.

Ecobank’s balance sheet shows that loan and advances increased by 23.63 percent on prior year to $164.2 million while TBs holding has increased by 48.41 percent to $90.7 million from $61.1million, representing 22,85 percent of total assets.

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