Treasury issues $110m bonds to capitalise RBZ

via Treasury issues $110m bonds to capitalise RBZ – DailyNews Live 2 December 2014

HARARE – Treasury has issued $110 million eight-year bonds to raise funds to capitalise the Reserve Bank of Zimbabwe (RBZ), Finance minister Patrick Chinamasa has said.

This comes as the central bank has been failing to perform the key role of lender-of-last-resort since 2009 after government ditched the inflation-ravaged local dollar to adopt a multi-currency system — dominated by the United States greenback.

Chinamasa noted that between $150 million and $200 million is required to capitalise the apex bank.

“Capitalisation of the Reserve Bank is critical in facilitating it to discharge its mandate and to bring confidence in the financial sector,” he said in his 2015 National Budget.

In a functional economy, a central bank’s role includes lending money to banks and other financial institutions when they have no other means to raise funds.

While adoption of the foreign currencies also limited the RBZ’s interventions through monetary policy, an economist with a local bank, who preferred anonymity, said  “should these and ancillary appropriate actions be pursued, the RBZ will transform into an effective, autonomous central bank, enabling it to fulfil, directly and indirectly, a substantive role in restoring confidence in the banking sector.”

“In general,this will accelerate a significant upturn of the economy, and maintain the attained economic revival,” she added.

Chinamasa also said authorities were pursuing the operationalisation of the interbank lending facility.

“…there has been significant progress in operationalising the African Export Import Bank (Afreximbank) guaranteed interbank facility, albeit after missing many deadlines,” the Treasury chief said, adding that the facility is expected to be operational by year-end.

In March, Afreximbank availed $100 million to Zimbabwe aimed at reviving the interbank market amid an acute liquidity crisis.

At the time, Afreximbank’s president Jean-Louis Ekra said “the initiative can only be successful if confidence is restored in the banking and financial sector.”

The financier’s support to Zimbabwe — through various facilities — stands at around $800 million.

Meanwhile, the prevailing tight liquidity conditions have resulted in high interest rates, which government hopes can be lowered by resuscitation of the interbank market anchored by a well-capitalised central bank.

Experts say the move by government to recapitalise the RBZ would help bring confidence in the banking sector.

Zimbabwe’s financial sector has remained fragile in the multi-currency regime due to multiple factors that include an unstable deposit base, poor corporate governance and high non-performing loans, but most importantly, the RBZ’s undercapitalisation and lack of lender-of-last-resort capacity.

COMMENTS

WORDPRESS: 2
  • comment-avatar
    kenneth R nedziwe 10 years ago

    At times I wonder who the so called EXPERTS are.

  • comment-avatar
    mark longhurst 10 years ago

    Treasury ??? what treasury, one has to have treasure to have a treasury but Zanu stole it all a long time ago and are now the beggars of Africa- pamberi mugabepigdog