Government to issue Diaspora Bond
http://www.theindependent.co.zw/
Thursday, 13 October 2011 15:30
Nqobile Bhebhe
FINANCE minister Tendai Biti says government will issue another Diaspora
Bond after overwhelming success of US$50 million bond floated in July.
He said a follow-up instrument is being worked on and would be announced in
the 2012 national Budget. The idea of the Diaspora Bond was mooted in 2009
in a bid to enlist the services of Zimbabweans to help rebuild the economy.
In his 2010 Budget, Biti announced the bond, which is a co-operation between
government, CBZ Bank, and underwritten by the by the Cairo-based African
Export-Import Bank (Afreximbank).
However, due to high interest shown in the Diaspora Bond, a second facility
is on the cards.
“We have begun putting together a framework for a follow up bond but with a
different creative name. We hope to announce it in the 2012 Budget,” said
Biti.
“To date, resources mobilised under the bond amount to US$42,5million and
the Diaspora Bond has benefited several companies which include Zimbabwe
Electricity Supply Authority (US$3m), NetOne ($8m), Hwange Colliery (US$5m),
Surface
Investments (US$13m), transport and mining sector got US$5m.”
A bond is a contract to repay borrowed money with interest at fixed
intervals.
Diaspora bonds have historically been crucial for raising development
finance during times of crisis in many developing countries particularly
India and Israel.
Records show that Israel has had yearly bond issues since 1951 and had
raised US$25 billion by the end of 2007, while India has had three separate
bond issues since 1991 and had raised US$11, 7 billion by the third issue in
2000.
More than three million Zimbabweans are in South Africa, UK and the US owing
to the political and economic crisis of the last decade.
Biti said the bond and several other home-grown financial instruments are a
measure of raising money from the domestic market.
“Zimbabwe is in a unique and horrible situation in that we only depend on
one fiscal instrument to finance operations, that is budget and taxation,
yet other countries rely on overseas assistance,” he said. “There is huge
money on overseas borrowing which Zimbabwe cannot access, World Bank (US$75
billion for sub-Saharan Africa), Africa Development Bank (US$30 billion),
but because of our crippling domestic debt we are ruled out.”
Zimbabwe’s national debt is said to be more than US$7 billion, outstripping
the country’s GDP, which is estimated at just over US$6 billion in 2010.
The bulk of the country’s external debt is owed to multilateral creditors
and the debt has continued to grow mainly as a consequence of interest and
penalty charges on existing payment arrears.