admin
Business Reporter
Local banks have significant financial capacity to lend to corporates that require working capital to support recovery from the Covid-19 pandemic, recent economic research findings have revealed.
The last available banking sector statistics show the sector has potential to play a key role in supporting the recovery of the corporate sector from the impact of Covid-19, the Zimbabwe Economic and Policy Research Unit (Zeparu) showed.
“At 38,82 percent against a benchmark of 70 percent, the loan-to-deposit ratio suggests that banks have room to increase credit for those companies that may need working capital,” Zeparu said in its latest report Economic Barometer Volume 21.
The capital adequacy ratio is more than three times the regulatory requirement of 12 percent. The liquidity ratio (75.59 percent) is also high, more than double the regulatory requirement of 30 percent.
Further, Zeparu said non – performing loans are also under check at 3,23 percent against a benchmark of 5 percent, although they might increase due to the economic slowdown from Covid-19.
As at end of December, total banking sector assets were $53.7 billion, total loans and advances stood at $10,2 billion while total deposits were pegged at $34 billion.
The COVID-19 pandemic is projected to severely impact on the global economic growth from 2.9 percent in 2019 to -3.0 percent in 2020.
Countries have had to incur huge costs to protect human lives and allow health care systems to cope. Further, measures to contain the spread of the pandemic have required isolation, national lockdowns, and widespread closures, thereby slowing economic growth across the globe.
Global growth forecast is still characterised by uncertainties although the initial forecast for 2021 is a growth of 5.8 percent.
“In the emerging markets, there is considerable diversity with some economies like China and India being projected to record positive growth of 1.2 percent and 1.9 percent respectively while economies like Brazil and Russia are expected to decline by 5.3 percent and 5.5 percent respectively,” Zeparu said.
Due to the pandemic, growth in Sub-Saharan Africa is expected to fall from 3.1 percent in 2019 to -1.6 percent in 2020. In 2021, growth of big economies in the region like Nigeria and South Africa is expected to recover from -3.4 percent to 2.4 percent and from -5.8 to 4 percent respectively.
Thus, the $18 billion set aside as a relief package from locally generated resources might not be enough in the face of debt distress.
Further, plummeting of external demand and collapse of some commodity prices could result in declining export earnings for Zimbabwe, given an export basket that is largely composed of primary products.
Bongani Ndlovu