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. Last Updated: 07/27/2016

Zimbabwe Seeks Taxes

HARARE, Zimbabwe -- The cash-strapped Zimbabwean government announced Tuesday that it was launching a door-to-door campaign to recover unpaid taxes from companies and small businesses.

Finance and Economic Planning Minister Herbert Murerwa said the move would affect tens of thousands of delinquent and defaulting companies.

"Only 33,000 or about half of Zimbabwe's 75,000 registered companies are paying tax resulting in the state being prejudiced of millions of dollars every year," he said.cent in May, are also on the way down, reaching 60 percent last week, but are still considered attractive.

"Ukrainian treasuries are going to be the new hit among emerging market debt instruments," said Vladimir Volpert, deputy head of the debt instruments department with the bank Rossiisky Kredit. "I expect to see that come true in a few months' time."

Volpert did not foresee a big shift of Western capital from GKOs to Ukrainian treasuries, however. He judged that the Ukrainian instruments will draw most interest from Russian and East European banks and their customers. Such investors badly need a new high-yield market as their own domestic instruments stabilize.

A Western fund manager in Moscow, who is already speculating with Ukrainian treasuries, pointed out that the volume of the market is currently too small to bear serious comparison with Russia's GKOs.

"Outstanding treasuries in Ukraine are just half a billion dollars, compared with $35 billion in Russia," said the manager, who asked not to be named.

That disparity is bound to get smaller as Ukraine acts on its promise to finance more of its budget deficit with domestic debt instruments, in line with a multibillion-dollar loan program from the International Monetary Fund expected to be approved soon.

The high yields on Ukrainian treasuries reflect a high level of perceived risk. The perception was reinforced in September, when the republic's Finance Ministry delayed a few days in redeeming matured tranches. The head of the National Bank afterward apologized to investors, and there is confidence that outright default will not recur.

"The Ukrainian government realizes the importance of not letting it happen again," said Valery Tetrov, an investment banker with CS First Boston in Kiev, "and I think foreign investors believe that it will not happen again."

Ukrainian t-bills are issued with three-, six-, and 12-month maturities. Until May 1996, the instruments were coupon-bearing -- providing income at intervals before the maturity date -- but new issues have been in a zero-coupon form, like Russian GKOs.

The success of Russian GKOs is partly due to their tax-free status, and investors are eagerly awaiting clarification on the tax status of Ukrainian treasuries. There are currently no limitations on purchase of Ukrainian treasuries by foreign investors.

The possibility of punitive taxes on profits from Ukrainian paper which is traded before its maturity has seriously damaged liquidity, according to a study by the Moscow investment bank, Renaissance Capital.