[2007-12-20]  RBZ Bonds Raise $14,5 Trillion
INSURANCE bonds introduced by the Reserve Bank of Zimbabwe in October, have raised $14,5 trillion, with banks picking up most of the issued paper.

The bonds were withdrawn from the market towards the end of last month after having been introduced on October 22.


The Insu-bonds had been issued on a three-year variable coupon that sought to mobilise funds to finance the Government's capital projects.

The bonds were offering rates between 100 percent and 300 percent.

RBZ Governor Dr Gideon Gono had blasted insurance firms for "betraying" the country's economic turnaround efforts by failing to adequately invest in public sector instruments.

"By their nature, insurance companies and pension funds are monumental hubs through which long-term capital can be mobilised," Dr Gono said.

He said the economy continued to be drawn back by a variety of factors, which included non-compliance with stipulated minimum prescribed assets holdings and over-concentration of business in non-productive money market and stock exchange investments.

Pension funds and insurance firms have concentrated most of their investments on the stock market where they account for over 85 percent of the Zimbabwe Stock Exchange trades.

The governor said experience the world over showed that insurance companies and pension funds played a pivotal role in providing development capital, particularly in the real estate sector.

In the 2008 Budget statement, Finance Minister Dr Samuel Mumbengegwi said Government planned to compel pension funds and insurance companies to inject a maximum 10 percent of their prescribed asset ratio requirements in indexed bonds.

Meanwhile, according to the Old Mutual monthly economic brief, Government domestic debt was estimated at $12,5 trillion at the end of October with 365-day Treasury bills making up 64,2 percent and the rest mostly comprising three-year bonds.

Government has often failed to raise the requisite capital to fund national projects at the same time when quasi-fiscal spending has remained high.





Source: Copyright © 2007 The Herald.