The Sunday News
Judith Phiri, Business Reporter
WITH the Victoria Falls Stock Exchange (VFEX) being one of the innovation reforms meant to support the process of financial deepening, Government is working on launching a US$ bond and list it on the United States dollar-denominated VFEX to build a yield curve not just for domestic debt, but also foreign debt, the Minister of Finance and Economic Development, Professor Mthuli Ncube, has said.
Dubbed a “Game Changer,” VFEX is a subsidiary of the Zimbabwe Stock Exchange (ZSE), launched last year in October as part of efforts to attract global capital, while also helping restore foreign investor confidence in Zimbabwe’s capital markets and help companies raise capital in foreign currency.
Speaking during a webinar on Zimbabwe’s Economic Recovery Path-Reforms, SDR and Priorities on Thursday, Prof Ncube said the launch of the VFEX last year was a major milestone and Government was working on launching a US$ bond soon.
“The VFEX targets export oriented companies but largely the mining sector. Government has intentions of launching a US$ bond on the competitive global platform. Without pre-emptying the size of the bond we are working hard to have it listed on the VFEX. Advisers are fine tuning things and we want to make sure that we also start to build a yield curve, not just for domestic debt, but also for foreign debt on VFEX,” he said.
Seed Co International in 2020 become the first counter listed on the VFEX and to date several mining and export oriented companies have shown interest to list on the bourse.
Prof Ncube said the Government working with private sector and regulators that fall under its purview are working hard to create micro-institutions that enable and facilitate investments by private sector, whether on an exchange or specific instruments.
He said as part of the wider economic reform agenda, Government developed an arrears and debt clearance restructuring strategy where it is now engaging various countries over its external debt which is estimated at over US$8 billion.
“The engagements are to see who could be a sponsor, because we need a sponsor, and once we are successful we will be able to move to the next stage which is to tackle those areas with the World Bank and African Development Bank and preferred creditors.”
The Minister said for now, the Government has taken the step of beginning to pay token payments to the World Bank and AFDB, as well as the European Investments Bank to show that Zimbabwe is a good debtor.
He said they have also taken yet another step which has not been done in the last 20 years, which is to start token payments to the 17 Paris Club bi-lateral creditors, among them UK, USA, Italy, France and Japan.
Prof Ncube said the reform agenda started in 2018 with its priority to address the twin deficit of budget and current account deficit, with the third leg being to introduce fiscal policy.
“Over the last three years, the economy has done well on the fiscal consolidation agenda, and has been able to balance the budget and in some cases recording a surplus year in and year out.
“We have eliminated the capacity of the fiscal side of creating unnecessary money creation and stopped using overdraft window from the Reserve Bank of Zimbabwe (RBZ) to pay wages. Since January 1, 2019, Treasury has not borrowed anything from the RBZ window and don’t see using it until middle of 2023,” he said.
He said the introduction of the foreign currency auction system resulted in several companies accessing capital for retooling and financing operations which has resulted in increased capacity utilisation.
The Minister said the fiscal consolidation, position of external sector balance as well as the monetary sector, has delivered the stability that the economy has enjoyed so far at least in the last 12 months.
Prof Ncube said the Government was bullish on projected economic growth of 7,8 percent which would be supported by a transparent allocation of the SDR funds.
He said the SDR funds will also support the reserve agenda, but over time will invest in some developmental projects, where the remainder is kept in SDR form to bolster the reserves and any contingent funding required for any project in future.
“We have formed an implementation committee I chair, which also have the RBZ Governor, Secretary for Finance and will report to President Mnangagwa on a monthly basis,” said Prof Ncube.
Securities and Exchange Commission of Zimbabwe (SECZ)’s chief executive officer Mr Tafadzwa Chinamo said more products were to be offered on the VFEX which are retail oriented and should attract the interest of ordinary Zimbabweans with free funds.
President of the Institute of Chartered Accountants of Zimbabwe, Mr Tumai Mafunga, looking at the forex change auction, said there was a need for continuously incentivizing exporters and those feeding into the auction.
