Securitisation to improve liquidity situation

Reserve Bank of Zimbabwe Governor Dr Gideon Gono said there were considerations for asset securitisation as a viable option to improve on liquidity.
He said securitisation of Zimbabwe’s assets can be structured in such a way that financial resources can be mobilised for infrastructure development, investment, restructuring national debt and alleviating liquidity challenges.
Funds raised from securitisation would also be used to transform maturity profiles of deposits from short to medium or long term and pool resources that can be backed by domestic assets.
Securitisation of national assets such as mineral resources is structured through a special purpose vehicle, which is a legal entity created for the purpose of holding the assets sought to be transferred by the originator and the issuance of securities.
“In Zimbabwe, both residential and commercial real estate are mostly mortgage free. However, these are illiquid assets.
“There is therefore need to unlock the economic potential of these assets by securitising and transforming them into liquid assets through real estate-backed security,” said Dr Gono.
Funds to purchase these equities can be obtained from offshore sources and backed by real estate in Zimbabwe.
Zimbabwe has got a low bank deposit base of about US$3,2 billion as at October 2011.
In a bid to assist banks, the Ministry of Finance made available US$7 million to the central bank in February last year to support the resuscitation of its lender of the last resort function.
But because of the stringent collateral requirements, banks could not access the lender of the last resort facility.
The collateral security requirements for the US$7 million included use of deeds of transfer on immovable property.
Finance Minister Tendai Biti in this year’s National Budget further allocated an additional US$100 million to the central bank for the lender of the last resort facility.
In a bid to improve liquidity conditions and augment resources allocated in the National Budget, Treasury withdrew US$110 million from Zimbabwe’s general special drawing rights allocation account at the International Monetary Fund.
The funds would be allocated towards infrastructure development, lines of credit to the productive sector and additional funding to the central bank in support of the US$7 million already available for its lender of last resort mandate.
Treasury will soon introduce discounted and tradable paper against the central bank statutory reserve liabilities to banks willing to participate.
RBZ owes US$83 million to banks in statutory reserves, a situation that has contributed to the prevailing liquidity challenges in the economy.