Bankers Association of Zambia – BAZ has attributed the sporadic and under-subscription of the Treasury bills – T-bills to the general low liquidity on the market. The Association has since urged government to unwind on the tough monetary policy stance taken last year to help bring some liquidity on the local market.
BAZ Chief Executive Officer Leonard Mwanza stated that there is less liquidity on the market due to some monetary interventions that were carried out to stem inflation from further increasing and also to bring stability to the Kwacha. He said the country crossed the year with these measures and they mopped out more liquidity from the market.
‘‘Government can help by pumping in a bit more liquidity onto the market by unlocking the arrears and paying down the various contractors whom they owe some money, there is a pile of arears to businesses and firms who provided a service to the government, if that money was released on the market it could help to improve market liquidity”.
“For as long as the liquidity situation remains tight as it is, we expect that there will be less money that will be going towards Securities portfolio like treasury bills and bonds.’’ Said Mwanza.
The BAZ chief was speaking in an exclusive interview with the Zambian Business Times – ZBT on January 20, 2020. He was reacting to last Thursday’s 56% under-subscribed Treasury bill that saw the debt instrument only attracting ZMW531 million worth of treasury bill subscription out of the total ZMw950 million offered by the central bank.
This signified a low apatite by both foreign and local investors. The Treasury bill is the security instrument that allows government through the central bank to borrow money from the public. Any member of the public is eligible to take part in the Treasury bill auction with the minimum amount of about K30, 000, with different tenors.
It can be either 90 days, 180 days or the maximum tenor is 364 days, and it is up to the individual to state the interest rate they wish to earn as part of their bid. Last Thursday’s Treasury bill auction was under-subscribed as the Kwacha also continued to be under pressure against the United States (USD) dollar on the back of thin foreign currency supply in the markets.
Analyst have challenged the Bank of Zambia – BOZ to be more innovative and further reduce the minimum amount from the current ZMW30,000 to as low as ZMW1,000 to allow members of the public to place funds which is currently lying in savings accounts with banks at less than 5% to 9% annual interest rates. Other frontier African central banks like the case in Kenya even went further to allow the public to place small amounts via mobile money.
