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The bank says indications in the market are that there has been increased activity on the property market as investors withdraw their investments from financial assets. In its monthly report on Zimbabwe for February, the AfDB said the shift in investments was necessitated by recent monetary interventions by the central bank to limit instant maximum cash withdrawals.
“Already, there are indications that most people are investing in physical properties, such as stands and shops in town, instead of financial assets. Such tendencies are in a bid to protect investments from any uncertainty in the economy,” said the bank.
The Reserve Bank in its January monetary policy set instant maximum cash withdrawal limits with more than US$10 000 requiring prior notice to the processing bank.
Measures were put in place to ease liquidity challenges that hit the market between December 2010 and January this year. However, the central bank will be lifting the restrictions effective March 1, 2012 as the measures proved to be counter-productive and could weaken bank depositor confidence, causing panic bank withdrawals.
According to the AfDB, there were fears that there would be reduced bank deposits, flight from weak banks to strong banks, externalisation of cash and investment in illiquid assets. Despite the latest move by the central bank, analysts say it is going to take time for investors to move back to financial assets.
According to the central bank, such measures were driven by the worsening liquidity challenges, circulation of large amounts of cash outside the formal banking system, delayed cash payments and illegal cash externalisation. There were also fears that depositors were moving from smaller indigenous banks to stronger banks.
To avert further liquidity challenges, Minister of Finance Tendai Biti and central bank governor Dr Gideon Gono have introduced a number of measures aimed at improving the liquidity position of the banking system.
To ease the liquidity squeeze, Treasury will soon be issuing Discountable and Tradable Instruments to willing participants against the central bank’s statutory reserves liabilities of US$83 million.
In a bid to meet infrastructure funding, Treasury will issue Infrastructure Development Bonds to raise US$50 million. The bond will have a tenure of five years at a fixed interest rate of 10 percent.
A sinking fund will be established to facilitate interest and principal payments. Treasury will also be advancing US$20 million to the central bank to support its lender of last resort facility.
Treasury is also working on mobilising US$73 million for the RBZ to carry out its functions.
Starting in March, banks will be required to maintain a maximum of 25 percent of their nostro account balances offshore to meet their day-to-day payment obligations. It is understood that about US$450 million is held by four big banks in their nostro accounts.
Online Reporter