Govt steps up efforts to recapitalise RBZ

This comes as economic analysts have criticised the Ministry of Finance for not indicating any specific strategy for recapitalising the RBZ as the US$100 million fund, jointly funded by some international financial institutions and a regional financier, remains on the cards with the inter-bank market crippled.

“It is proving that the Government cannot help the situation at the apex bank as each and every passing policy statement remains a ‘promissory note’ to capitalise the central bank,” said economist Mr Takunda Mugaga.
Recapitalisation of the RBZ is expected to enhance the stability of the local financial services sector, which the International Monetary Fund recently said was prone to “systemic risks”.

Finance Minister Tendai Biti said although he had not announced it during the Mid-Term Fiscal Policy Review Statement, Government was working on mechanisms to improve the functions of the central bank.
“We want to recapitalise the RBZ, but we cannot do that without bifurcating the US$1 billion debt. To this extent we are going to create an SPV to deal with the bank’s debt: only after that will we be able to recapitalise it,” he said.

The SPV is expected, among other things, to find out how the debt was accrued, audit and absorb it. However, an analyst who chose to remain anonymous said the earliest such an instrument would be operational would be around mid-2013.
“Considering that the SPV will be introduced through an Act of Parliament, the normal legislative process follows that it could be operational in at least 18 months time.”

But it is not clear at what stage the process would be at the moment.
The Government has made available to the RBZ a US$100 million fund for its function as a lender of last resort. The lender of last resort role was revived in February last year after RBZ received funding from Treasury.

The central bank had last performed that role in 2008, leaving banks vulnerable in the event of problems in the sector.
A lender of last resort is an institution, usually a country’s central bank, which offers loans to banks or other eligible institutions that are experiencing financial constraints, are considered high risk or are near collapse.