Comment: We at Come Home To Zim will watch carefully to see when this Bond is actually launched, and pass on the information. It is worth noting that the most recent Reserve Bank bond to mature (raised and guaranteed by government), has paid investors absolutely zero. The bond matured in January 2010 but the bank defaulted on its repayments of investment with the promised interest. But perhaps the participation of Afreximbank in this scheme, will give potential investors a little more confidence this time…
We also wonder why, with all those diamonds at their disposal, the government needs diasporeans’ cash?
http://www.thestandard.co.zw/
Saturday, 20 February 2010 17:20
ZIMBABWE’S begging bowl will be extended to the Diaspora once again as the
country seeks to raise US$50 million to help finance the rebuilding of the
economy. The fund-raising initiative will be carried out through the
floating of a Diaspora Bond to enlist the services of non-resident
Zimbabweans in the reconstruction of the country.
The bond – a formal contract to repay borrowed money with interest at fixed
intervals – was first mooted last year and was supposed to be floated in
July.
But it was put on hold to allow promoters to tie a few loose ends.
African Export-Import Bank (Afreximbank) and government would guarantee the
bond.
Gift Simwaka, Afreximbank’s regional manager for Southern Africa told
Standardbusiness last week that the parties are working on the coupon
(interest) to be charged.
“The coupon is yet to be determined but it would be at competitive rates and
in line with prevailing market conditions at the time of subscription.
“The tenure would be three years,” he said.
The idea of the Diaspora bond was mooted last year in a bid to enlist the
services of Zimbabweans to help rebuild the economy.
Over three million Zimbabweans are in the Diaspora in South Africa, UK and
US having fled the political and economic crisis of the last decade.
The majority of them are professionals and plans to lure them back have hit
a brick wall due to low salaries offered on the local market.
Every month, the non-resident Zimbabweans send money to prop up struggling
relatives back home in the wake of low salaries averaging US$200 a month.
Remittances from the Diaspora topped US$190 million last year, a 142%
increase from the previous year.
In the three-year Macro-Economic Policy and Budget Framework launched last
year government recognizes the role played by non-resident Zimbabweans in
economic development.
It said government will develop an appropriate remittance framework linked
to investment opportunities working in conjunction with associations of
non-resident Zimbabweans.
Government bonds are affected by a number of variables such as inflation and
the perceived country risk.
Countries that are seen to be riskier than others have to offer a higher
coupon (interest) in the first place to attract investors than those that
have stable economies like the United States.
The more risky the country, the lower the price and therefore the higher the
yield and vice-versa. If a bond’s price falls, its yield rises and
vice-versa.
Falling yields are good for an economy and are referred to by economists and
politicians as “long-term interest rates” as it enables companies and
government to borrow more cheaply next time they need to.
Zimbabwe desperately needs the capital to kick start the economy.
The country’s revenue inflows, though increasing, cannot cover the projected
national costs. In 2010 government expects to get US$1.4 billion in revenue.
But with expenditures totalling US$2.250 billion, it means that the US$810
million in vote of credits pledged has to come in.
BY NDAMU SANDU
