The Role of Treasury Bills in a Zimbabwean Portfolio

In most developed markets, government treasury bills occupy a specific and well understood role in a portfolio. They are the closest thing to a risk free asset, the benchmark against which every other investment is measured, and the place investors park capital when they want minimal risk in exchange for minimal return.

That framework does not transfer cleanly to Zimbabwe, and investors who apply it without adjustment end up misunderstanding what they actually own.

The core assumption behind treating treasury bills as risk free is that the currency risk and the sovereign credit risk can be treated as effectively negligible, at least over the short maturities typical of treasury bills. In a market with a stable, freely convertible currency and a government with a long track record of honouring its obligations, that assumption is reasonable. In Zimbabwe, both halves of that assumption require real scrutiny rather than being taken for granted.

The currency question is the more immediate one. Zimbabwean treasury bills, when denominated in ZiG, carry the currency risk of the ZiG itself. Unlike a US Treasury bill, where the currency and the credit risk are two entirely separate questions because the US dollar's stability is not in doubt, a Zimbabwean treasury bill bundles both questions together. An investor holding the bill is making a judgment not just about whether the government will repay, but about what that repayment will actually be worth by the time it happens, in terms of real purchasing power or in terms of conversion back to a hard currency.

This means the yield on a ZiG denominated treasury bill needs to be evaluated against expected currency movements, not treated as a standalone real return. A treasury bill yielding what looks like an attractive nominal rate can still produce a negative real return, or a negative dollar return for an investor thinking in those terms, if the currency depreciates by more than the yield compensates for.

The sovereign credit question is separate but also relevant. Zimbabwe's fiscal position and debt servicing history mean that treasury bills cannot be assumed to carry the same negligible default risk that would be assumed in a market with a long, uninterrupted track record of honouring government obligations. This does not mean default is likely or imminent. It means the assumption of negligible credit risk needs to be an explicit judgment rather than an inherited assumption from how treasury bills function elsewhere.

Given these two factors, what role should treasury bills actually play in a Zimbabwean portfolio?

The first honest answer is that they should be evaluated as a distinct asset class with its own risk and return characteristics, not as a stand in for the risk free rate in valuation models or portfolio construction. Using treasury bill yields as a risk free benchmark for discounting other Zimbabwean assets embeds an assumption that does not hold, and can lead to systematically incorrect valuations for everything measured against that benchmark.

The second is that treasury bills can still serve a genuine liquidity management function, a place to hold short term capital that needs to remain relatively liquid and accessible, even if it is not functioning as a true risk free anchor for the rest of the portfolio. This is a legitimate and useful role, distinct from treating the instrument as risk free.

The third is that for investors seeking dollar denominated, lower risk exposure within Zimbabwe, instruments and structures that avoid ZiG currency exposure entirely may serve the traditional treasury bill role more effectively than the ZiG denominated bills themselves, even if the nominal yield looks less attractive on paper.

None of this means treasury bills should be avoided. It means they should be understood for what they actually are in the Zimbabwean context, a short duration instrument with real currency and credit considerations attached, rather than imported wholesale as the safe, boring allocation that the same instrument represents in a market with a stable currency and an uninterrupted sovereign track record.

Getting this distinction right changes how a Zimbabwean portfolio should actually be constructed, and it is the kind of detail that separates portfolios built on genuine local understanding from portfolios built on frameworks imported from markets that do not share Zimbabwe's specific characteristics.