Government To Launch USD Bond On VFEX
5 September 2021
The government is working on launching a US$ bond and list it on the United States dollar-denominated Victoria Falls Stock Exchange (VFEX) to build a yield curve for both domestic debt and foreign debt.
The VFEX, 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.
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Speaking during a webinar on Zimbabwe's Economic Recovery Path-Reforms, SDR and Priorities on Thursday, the Minister of Finance and Economic Development, Professor Mthuli Ncube said:
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.
Seed Co International in 2020 became the first counter listed on the VFEX and to date, several mining companies and export-oriented companies have shown interest to list on the bourse.
Prof Ncube said the Government in conjunction with the private sector and regulators that fall under its purview are working to create micro-institutions that enable and facilitate investments by the private sector, whether on an exchange or specific instruments. He added:
- The government had developed a debt and arrears-clearance restructuring strategy where it is now engaging various countries over its external debt estimated at over US$8 billion.
- The Government has begun to pay token payments to the World Bank and AFDB, the European Investments Bank and to the 17 Paris Club bilateral creditors, among them the UK, USA, Italy, France and Japan.
- Over the last 3 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.
- Since January 1, 2019, Treasury has not borrowed anything from the RBZ window and don't see using it until the middle of 2023.
- The forex auction system resulted in several companies accessing capital for retooling and financing operations which has resulted in increased capacity utilisation.
- SDR funds (from IMF) 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.
More: The Sunday News