Bond notes now at $102m

Bond notes now at $102m

Source: Bond notes now at $102m | The Herald March 17, 2017

Happiness Zengeni Business Editor
The Reserve Bank of Zimbabwe has said bond notes in circulation have increased to $102 million as the central bank continues to pay out the Afreximbank-backed $200 million export incentive.

In an interview with The Herald Business, RBZ governor Dr John Mangudya said the bond notes together with bond coins account for 1,8 percent of deposits at the banks. He added that the bond note continued to trade at par with US dollars but indiscipline and a general lack of confidence in the economy were fuelling the parallel market.

“It is lack of discipline and confidence that cause some traders to have multi-tier pricing system on some products, especially essential products such as cooking oil.”

Generally, bond notes have overcome the initial skepticism and have been well received by the market to an extent reflecting a new confidence in the central bank, however, unscrupulous traders including some fuel stations are now using different prices for selected goods.

On interest rates, Dr Mangudya said rates must reflect the strength of the dominant currency in the economy to make borrowing by productive sectors more affordable.

The central bank chief’s remarks come after he directed banks, in his 2017 monetary policy statement, to whittle down annual lending rates to a maximum 12 percent effective April 1, 2017.

Prior to the recent announcement, bank lending interest rates were determined by a framework allowing banks to charge between 6 percent and 18 percent, depending on the risk level. Risk level gauge ranged from low, moderate to high.

Dr Mangudya scoffed at the assertion that the lower lending rates could discourage credit extension to the productive sectors saying their lending was being stifled by high cost of funding.

Bankers’ Association of Zimbabwe president Charity Jinya told a parliamentary portfolio committee this week that if the ceiling for banking lending rates continued to fall, banks could cut lending to productive sectors in favour of TBs.

“The banks were not lending because at high interest rates you increase non-performing loans. The chances of getting your money back at 25 percent per annum (are slim). What will you (as a business) be selling to get a 30 percent margin?”

The Governor said in the monetary policy statement that while the banks had made progress in reducing cost of lending, interest rates remained well above thresholds that support borrowing to finance operations in productive sectors.

“We are in a dollarised economy; we need to make sure that our interest rates reflect the currency that we are using. The problem in Zimbabwe is that (banks) are using the Zimbabwe dollar based regime to determine interest rates.

“On Wednesday, the Federal Reserve increased interest rates from 0,7 percent to 1 percent; that range.

“It means we also need to ensure that our interest rates in Zimbabwe are (US) dollar based not Zim dollar based” he said.

Dr Mangudya said banks cannot use cost of funding as an excuse considering that none were getting offshore lines of credit.

COMMENTS

WORDPRESS: 7
  • comment-avatar
    Morty Smith 8 months

    “Generally, bond notes have overcome the initial skepticism and have been well received by the market to an extent reflecting a new confidence in the central bank”

    An excellent example of fitting several lies into a single sentence

    • comment-avatar
      Chatham House 8 months

      Now $102 million but soon to be $102 trillion. Just another Dr. Gideon Gonzo Game.

  • comment-avatar
    Ngoto Zimbwa 8 months

    Governor is deluded, just like all in the ZANU fold.
    And, it’s the Herald after all!

  • comment-avatar

    What i don’t realize is if truth be told how you are
    not really much more neatly-preferred than you may be now.
    You’re very intelligent. You already know thus considerably in the case of
    this topic, made me for my part believe it from a lot of varied angles.
    Its like women and men are not fascinated unless it
    is one thing to accomplish with Woman gaga! Your personal stuffs great.

    At all times handle it up!
    barcelona trøje børn

  • comment-avatar

    I’m very happy to uncover this site. I want to to thank you for your time for this particularly fantastic read!!
    I definitely enjoyed every little bit of it and i also have you bookmarked to see new stuff on your site.

  • comment-avatar

    Oh my goodness! Impressive article dude! Thank you,
    However I am having problems with your RSS. I don’t understand the reason why I am unable to join it.
    Is there anybody getting similar RSS problems? Anyone that knows the solution will
    you kindly respond? Thanx!!

  • comment-avatar

    Pretty component of content. I just stumbled upon your website and in accession capital to
    assert that I acquire actually enjoyed account your weblog posts.
    Any way I’ll be subscribing for your feeds or even I achievement
    you get entry to consistently rapidly.