Golden Sibanda Senior Business Reporter
The second half of this year and greater part of next year will likely present more headwinds for the banking sector on account of high inflation, tightening liquidity and the regulatory interest rate cap, economic analyst have said.
Finance and Economic Development Minister Mthuli Ncube has already indicated that a combination of the impact of ongoing reforms and natural disasters (Cyclone Idai and drought) will weigh heavily on the economy, which he has forecast to contract by 2 percent this year.
The liquidity situation in Zimbabwe has continued to tighten on the back of a US dollar crunch, adoption of the mono-currency and mopping up of liquidity by the central bank to curb speculative trading pressures on exchange rates.
Zimbabwe is facing shortage of the greenback due to the significant mismatch between its export and import bills, amid dependency on imports while liquidity situation has tightened after the Reserve Bank of Zimbabwe took over all historical external debts and directed that the related unprocessed funds be transferred to the apex bank.
Most Zimbabwean entities that held external debt could not settle their obligations due to an acute shortage of foreign currency in the country even though they may have had their Zimbabwe bank accounts funded.
And as Government continues with economic reforms targeted under the Transitional Stabilisation Programme to restore key and proper economic fundamentals, inflation rate has broken loose, rising from 5,39 percent in September last year to hit 176 percent in June this year.
“Although interest rate caps have been lifted, industry players may not have the capacity to sustain borrowing at current levels of 30-50 percent,” said equities trading firm Inter Horizon Securities in a report on NMBZ first half results.
“Further, we expect the minimum statutory capital requirement in the short to medium term to be revised upwards in cognisance of a depreciating currency which will exert pressure on the banking industry as deposits have nominally accelerated at par with rising inflation,” IH Securities added.
However, the Reserve Bank of Zimbabwe said in its banking sector report for the first quarter of this year that the financial services industry remained largely resilient despite the mounting headwinds, with the majority recording profits in 2018.
Challenges besetting the economy are projected to persist, IH Securities said, in the wake of monetary reforms by the Reserve Bank of Zimbabwe, which inadvertently have eroded real capital.
Zimbabwe’s economic landscape has changed dramatically since September last year on the back of reforms Government is instituting to rebalance the economy.
Part of the reforms have entailed liberalisation of fuel procurement, floating the exchange rate, separating RTGS and foreign currency accounts, introduction of intermediated money transfer tax, containing Government expenditure, establishing an interbank market, introducing mono-currency and scrapping or banning the multi-currency system among other measures.