ANALYSTS have questioned the ability of the central bank to come up with a clear economic plan, after it backtracked on its earlier decision to issue 91-day treasury bills.
The RBZ last week reintroduced the short-term paper to mop up liquidity on the market, a move that was in direct contrast to its earlier decision to scrap the bills.
Analysts said it was now difficult for business to plan in an environment where the central bank continues to shift policies overnight.
The latest move saw the RBZ immediately floating 91-day TBs to raise $200 billion, although it only managed $175 billion. The latest short-term effort came after the market reacted reluctantly to the central bank’s long-term 180-day paper, thrust on the market to mop up excess liquidity.
An analyst said lack of policy consistency on the part of the RBZ showed its lack of strategy in dealing with economic challenges facing the country.
“It really becomes difficult to trust the economic recovery plan of a central bank which seems not to have a single (clear) strategy to deal with the current challenges,” he said.
Other analysts said the central bank had no choice but to backtrack on its long-term paper ambitions as investors were more interested in short-term investments in a volatile economic climate.
“The decision by the Reserve Bank had put them in a difficult position as the old paper was failing to find any takers, leading to an urgent need to reintroduce the attractive short-term 91-day TBs,” he said.
The 91-day paper’s reintroduction comes after the central bank halted the issuance of short-term paper to the financial markets without offering an explanation.
The move to bar short-term paper was announced by Hazvinandaa Saburi, the central bank’s acting division chief for financial markets.
Before the decision, the market was distributing short-term paper ranging from 7-14 days and attracted an average of 50% interest, while the 30-day paper averaged 55% in interest.
The 60-day paper attracted 60%, while the 90-day paper attracted 75% interest. The decision to bar the issuing of short-term paper meant that the central bank was only in a position to issue treasury bills.
TBs are issued by the central bank on behalf of the government to raise money for various national purchases, including essential imports of energy and fuel.
In its effort to force institutions to adhere to the new regulations, the central bank announced that institutions that breached the new requirement would be forced to buy a two-year paper attracting a lowly penal rate of 17%.
By yesterday, the market was still digesting the likely impact of the central bank’s decision.
Analysts said the decision was mainly a result of the market’s lacklustre response to the central bank’s long-term paper.