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OPINION: Treasury Bills must be legal tender; this will stem company closures, improve liquidity
15/09/2015 00:00:00
by Constantine Chimakure

LAST month President Robert Mugabe signed the Reserve Bank of Zimbabwe Debt Assumption Bill into law and under this law the government is going to issue about US$1,3 billion in Treasury Bills to pay creditors of Reserve Bank (RBZ).

If the RBZ and government can pay their creditors using Treasury Bills, why should the creditors of the RBZ not use such Treasury Bills to settle their own debts too?

Some creditors of the central bank also owe money to banks, the Zimbabwe Revenue Authority (Zimra), city councils and other government institutions, which they failed to pay because they were waiting for RBZ to pay them first.

There is, therefore, a legal and moral justification for the Treasury Bills to be used by everyone to settle their debts. Therefore, banks, including liquidators of banks, Zimra, and city councils, should accept such Treasury Bills as a form of loan repayment or form of settlement of debt without which the economy will not stabilise.

Some institutions and banks are not accepting Treasury Bills as loan repayment while others are accepting them, yet banks are well positioned to accept and hold Treasury Bills to maturity or until the liquidity crisis is resolved. After all, the Treasury Bills are good for banks as they can be used to revive the interbank market or to pay depositors by banks under liquidation.  Depositors of banks under liquidation are better off being given Treasury Bills than nothing.

It needs to be remembered that a lot of the above mentioned US$1,3 billion was taken from people’s bank accounts by RBZ in US$, before the current governor of RBZ John Mangudya, and the failure to return such money as cash to banks is a major cause of the liquidity crisis and the gridlock of payments in the economy. This action by RBZ violated people’s property rights to their bank accounts. Such economic mistakes need to be corrected properly.

In the July 2015 Monetary Policy Statement, the RBZ indicated it was moving towards correcting such missteps by acknowledging that there is gridlock in the national payment system and I quote below from pages 66 and 67 of the Monetary Policy statement:

“There is great and urgent need to take stock of the levels of indebtedness of Government to public enterprises, public enterprises to Government, public enterprises to public enterprises and Government to the private sector.  It is essential to do so in order to minimise and/or remove the current serious gridlock of payments within the national economy i.e. situations where several payments each await settlement of the others.


“Most entities, including Government, are behind with their statutory obligations, trade payments and bank loan repayments because they owe each other and are waiting to be paid by the others and vice versa. There is therefore great need to come up with netting payment systems resolution in order to cleanse the historical obligations of all affected entities including Government.  This needs urgent attention before the payment gridlocks escalate to unsustainable levels.”

To unlock the gridlock of payments in our national economy, the Treasury Bills of US$1,3 billion must be used to settle debts; failure to do so can easily trigger constitutional legal cases, because, in terms of our laws, no Zimbabwean can print money except RBZ.

It is the legal duty of the RBZ to print money and make the economy liquid. Now, if the RBZ has already admitted that it cannot print the US Dollars to resolve the liquidity crisis and is using Treasury Bills to settle debts, it means Treasury Bills are now being used like legal tender to settle debts, and other institutions like banks, including liquidators of banks, Zimra and municipalities should also accept such Treasury Bills as a form of settlement of debts too, until the Reserve Bank is able to resolve the liquidity crisis.

Mangudya has already taken the lead in using Treasury Bills like legal tender to settle debts, hence other institutions should follow that example and use Treasury Bills to set off or net off debts in the above mentioned gridlock of national payments.

The use of Treasury Bills like legal tender to settle debts as mentioned above will bring relief to a lot of people and without such relief there will be more liquidations of debtors, company closures, unemployment and vendors everywhere as they seek to survive in an unstable economy. Who does not need a better economy for all?

Chimakure is a veteran journalist. He can be contacted at cchimakure@gmail.com

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