via RBZ taming economic headwinds | The Herald December 21, 2015
Happiness Zengeni and Martin Kadzere
RESERVE Bank of Zimbabwe governor Dr John Mangudya said last week Zimbabwe has made significant strides in setting the stage for economic transformation next year.
He, however, warned that lack of discipline among individuals and corporates – an important ingredient in achieving transformation – might work against milestones already achieved.
Dr Mangudya said various several policy interventions, which were put in place this year by the central bank would see strong recovery of the economy next year and beyond.
He said despite the inability of the central bank to perform its traditional functions as a result of the multi-currency system, “we re-engineered our own tools” to ensure stability is achieved.
These include the Africa Export and Import Bank interbank facility, which enables banks with surplus to lend those in deficit and the establishment of ZAMCO, a vehicle being used to remove toxic assets from books of financial institutions and companies.
More importantly, Dr Mangudya said the acceptance of the country plan to repay the debt owed to multi-lateral institutions has minimised the perceived country risk.
Zimbabwe’s debt clearing strategy was supported by its main creditors in October in Lima, Peru during the annual meetings of the International Monetary Fund and the World Bank.
Zimbabwe intends to clear its arrears to the three multinational institutions, the IMF, ($110 million), the World Bank ($1,15 billion) and the AfDB ($601 million) by mid next year.
“You are aware that we are in a multi-currency system and most of the monetary policy tools; the traditional tools won’t work and as central bank we had to look for our own policy instruments to ensure stability is here,” said Dr Mangudya.
“That has been achieved.
“Next year should be transformative for Zimbabwe. We have stabilised the economy; the financial service sector and we are now going beyond stability. We need to transform.”
Dr Mangudya said the $135 million Afretrade facility has stabilised the banking sector, with about $85 million having been lent to financial institutions in deficit. Apart from that, the window has helped the bank to define the marginal cost of funding.
He also expressed optimism that the country would fulfil requirements precedent before repaying the debts to the multilateral financial institutions.
He said “the clearing of the debt will improve the country risk profile and allow money to flow into the country”.
“We are minimising the country risk so at the end of the day perception for Zimbabwe to the international financiers and investors look good so that money can flow into the country. We are happy that we have succeeded,” said Dr Mangudya.
Through ZAMCO, efforts have been made to help struggling companies through restructuring of short term borrowings to long term.