‘Monetary policy should promote hard currency lending’

Oliver Kazunga, Senior Business Reporter
THE Zimbabwe National Chamber of Commerce (ZNCC) has called on the monetary authorities to craft policies that foster lending in hard currency to ensure utilisation of US$1,8 billion funds that are lying idle in Foreign Currency Accounts.

While the weekly Foreign Currency Auction Trading System has helped improve access to hard currency for the productive sectors, ZNCC said there was a need to unlock forex lending from banks as well to ease pressure on the auction platform.

This is critical given that the auction system is subject to delayed disbursements of allotments while other businesses have been disqualified from participating.

“The bank should craft measures that promote lending in foreign currency so as to utilise the US$1,8 billion lying idle in Foreign Currency Accounts (FCAs),” said ZNCC in its recent submission to the RBZ.

“This will lessen pressure on the foreign currency auction market while spurring economic activity in the productive sectors.”

Citing concerns from forex bidders, ZNCC has implored the RBZ to expedite interventions aimed at improving the efficiency of the forex auction market.

“We acknowledge the bank’s commitment to improve the efficiency of the auction system and reaffirming this by the commitment to ensure no allotment backlogs,” it said.

“However, our position stands guided by the fact that the backlogs will naturally disappear if a market-clearing exchange rate is established. “We reiterate that the auction system should be continuously improved to enhance its price discovery function.”

It stressed that a move towards a more competitive banking system was more likely to increase the response of economic activities to monetary policy. This will be on the expectation that it would accelerate credit expansion and lessen collusion behaviour among commercial banks when allocating financial resources.

Cognisant of the need to tame inflation using interest rates, the chamber has called on the RBZ to provide affordable interest rates to the productive sectors of the economy but stressed the need to balance this with efforts to tame inflation. –

@KazungaOliver.