The stock of the government’s treasury bills has risen to $338 million as at March this year from $75 million when the instruments were introduced two years ago with state borrowings overtaking private sector lending, latest Reserve Bank of Zimbabwe figures have shown.
According to the RBZ monthly report for March, the stock of trade bills which peaked at $248 million before the introduction of treasury bills in 2013, now stands at $122 million, reflecting a weak appetite by financial institutions for private sector debt. In March last year, trade bills accounted for $166 million of banks’ holdings compared to $255 million held in treasury bills.
Economic analysts say while interest rates have been declining under pressure from increased offshore funding, a gradual growth in treasury bills could reverse this trend as the country continues to face liquidity constraints.
“There is a gradual but significant crowding out of private sector lending to the tune of $340 million which has effectively gone from the market as lending to government via treasury bills,” said an economist with a financial institution who requested anonymity on professional grounds.
University of Zimbabwe Graduate School of Management professor Tony Hawkins said the emerging trend, which he said has been going on for nearly a year, reflects structural weaknesses in the economy.
“During a period of deflation which we are in now in, this would be pretty much what you would expect to happen. You would expect private sector lending funding to be flat and so this is a reflection of the state of the economy,” said Hawkins.
On government crowding out the private sector, he said: “I don’t think its crowding out at all, I think banks are quite risk averse and pretty reluctant to lend to high risk operations and that’s why there is so much pressure on them to lend to agriculture and small enterprises and so on.”
The report shows that broad money supply was $4 370.32 million in March 2015, up from $4 337.89 million in February 2015. The annual growth of broad money, however, decelerated from 7.86 percent in February 2015 to 6.75 percent in March 2015.
“Contributing to the annual growth in broad money were increases in long term deposits, of 29.29 percent; savings deposits, 9.97 percent; and demand deposits, 2.19 percent. Short term deposits, however, registered a decline of 2.58 percent over the same period,” reads the report.-The Source