Reserve fund to be set

Business Reporter
ZIMBABWE intends to establish a Statutory Reserve Fund to be administered by the Reserve Bank and Government may borrow from the fund for infrastructural development.
The statutory reserve fund will be funded from a percentage deducted from bank deposits.
Previously, Zimbabwean banks were required to lodge a cumulative 5 percent of both offshore and local deposits as statutory reserves.

The statutory reserves were however scrapped in 2010 in a move aimed at improving liquidity and lowering interests’ rates. The central bank kept the statutory reserves as a buffer used to protect banks in the event of a sudden rise in withdrawals.

Unlike the previous statutory reserves where the funds would lie idle, the Reserve Bank may now invest the money from the SRF while 65 percent of the funds shall be lent to the Government, according to proposed draft amendments to the Banking Act.

“The moneys paid . . . shall be deposited into the Statutory Reserves Fund by the Reserve Bank,” reads part of the proposed amendments. “The Reserve Bank may invest the moneys in the Statutory Reserves Fund in such securities as the Board thinks fit (and) the Minister, after consultation with the (RBZ) board, may borrow from the Statutory Reserves Fund moneys for the purposes of infrastructural development.” The loan conditions — the tenure and rate of interest would be fixed by the RBZ board.

At any time, if the board considers that the money in the SRF are inadequate to meet the liabilities of any banking institution, the central bank may notify the minister of finance in writing to repay the amount of any loans or portion of the loan.