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Prosper Ndlovu Business Editor
THE Reserve Bank of Zimbabwe (RBZ) has received $100 million recapitalisation from Treasury in a milestone step aimed at restoring the central bank’s lender of last resort function. The move is part of a cocktail of measures towards confidence building and production enhancement within the economy that RBZ Governor John Mangudya announced yesterday in his 2015 monetary policy statement.
Major highlights include demonetisation of the Zimbabwe dollar and compensation of account holders who lost their savings when the country adopted the multiple currency system in 2009.
RBZ has set June, 30, 2015 as deadline for the demonitisation exercise envisaged to gobble an estimated $20 million.
Mangudya said all genuine or normal bank accounts, other than loan accounts, as at 31 December 2008 would be paid an equal amount of $5 per account using the then prevailing United Nations (UN) exchange rate to convert Z$ balances.
He announced setting up of a $200 million interbank facility supported by the African Export-Import Bank (Afreximbank) under the Afreximbank trade debt backed securities (AFTRADES).
The facility is already operational and would be managed by the Reserve Bank as an agent bank for Afreximbank.
The initiative is set to address the circulation of liquidity or funds within the local financial sector and would be used as a precursor programme for the lender of last resort function by the Reserve Bank.
Mangudya said the timely capitalisation of the central bank now needs to be supported by the passing of the Reserve Bank Debt Assumption Bill – currently on second reading in Parliament.
The passing of the bill into law is expected to cleanse the bank’s balance sheet and to bring normalcy to the financial sector.
He said progress has been made in amending the Banking Act whose proposals have been approved by Cabinet.
The amendments are designed to strengthen the supervisory and regulatory framework in the sector and cover corporate governance, troubled bank resolution, resolution of non-performing loans (NPLs), credit referencing system, registration of bank holding companies and consumer protection.
As part of the amendments, the RBZ has with effect from January, 2, 2015 assumed a supervisory role over the Infrastructure Development Bank of Zimbabwe (IDBZ) and Small and Medium Enterprises Development Corporation (SEDCO).
The two institutions are now required to comply with the Reserve Bank’s regulatory requirements.
RBZ has also set up a credit registry department as a unit in the bank supervision division to co-ordinate the collection of credit information from all banking institutions and microfinance institutions and maintain the databank for the credit registry.
To buttress distribution of recently introduced bond coins, Mangudya said the central bank would with immediate effect engage all easy link money transfer agent outlets to supplement banks in making the coins available to the public without charging commission or withdrawal fees.
He said plans were underway to set up a “Consumer Rise and Shine” awareness campaign for the promotion of bond coins in close collaboration with the Consumer Council of Zimbabwe.
In addition to distributing bond coins, easy link money transfer agent outlets would with immediate effect, accept to change Rand coins for bond coins at the prevailing exchange rate of the Rand to the US$.
At present bond coins, which are indexed at par with the US$, are in denominations of 1c, 5c, 10c and 25c while the 50c denomination will be introduced next month.
Mangudya said the RBZ would during the course of the year, mobilise resources for expansion and restructuring of the Distressed Industries and Marginalised Areas Fund (Dimaf) to cater for medium finance requirements to rehabilitate ailing firms.
He said a $50 million seed capital for accelerated gold production through Fidelity Printers and Refineries has been set up with a target of producing 30 tonnes of gold by 2020 and reaping $1,5 billion in revenue.
Mangudya acknowledged the competitiveness challenge of the national economy and the need to arrest cost drivers.
These include, but not limited to, municipality tariffs, environmental management fees, licensing, tariffs, labour costs and non-tariff barriers, which increase the cost of doing business.
He called for quick amendments to the Labour Act to be in sync with best practices and suggested redefining the Poverty Datum Line (PDL) to be indexed per person at $97,33 as opposed to a $584 for a family of six.
Mangudya insisted the economy could not afford salary increases this year and proposed trading a wages and salary freeze for price reduction.
In line with regional trends, Mangudya said RBZ in liaison with the Bankers Association of Zimbabwe has agreed to lower costs of access to banking services to cater for a majority of low income earners.
He said several local financial institutions have adjusted interest rates downwards to levels below 10 percent per annum and urged intensified reduction in finance charges to weed out non-performing loans and company closures.
The central bank increased the free threshold on external loans to allow companies to access offshore lines of credit of up to $10 million from $7.5 million without prior approval by the external loans and exchange control review committee.
The resolution of NPLs under the Zimbabwe Asset Management Corporation (Zamco), an independent asset management company, remains unchanged.
To date Zamco has acquired NPLs amounting to $65 million using other financing mechanisms provided for in its funding strategy.
Mangudya said the country’s inflation developments would continue being influenced by the changes in oil and food prices as well as the Rand/$ exchange rate dynamics.
He projected inflation would remain in negative territory for the greater part of 2015, reflecting the effects of depressed international oil and food prices and weaker currencies against the US$.
Online Reporter