via Chinamasa bank attacks ‘unwarranted’ – The Zimbabwe Independent January 17, 2014 by Kudzai Kuwaza
FINANCE minister Patrick Chinamasa’s attack on the banking sector over its failure to mobilise external lines of credit is unwarranted given the state of the country’s economy and the political situation, analysts have said.
Tension has been simmering between the banking sector and government amid accusations that the sector is frustrating government efforts to turn around the ailing economy.
Speaking at an economic outlook symposium on Wednesday in the capital, Chinamasa accused banks of being reluctant to support government efforts as evidenced by the reduction in lines of credit.
“I get this feeling that they (banks) are imposing sanctions on their own country because some of these banks before these problems had lines of credit of US$800 million annually,” Chinamasa said.
“The question that again arises is why are they not doing these things they used to do before. Is it because they don’t like the government? They don’t like us? They don’t like the country? What is the problem?”
Chinamasa said the reduced lines of credit were basically an exit strategy, saying banks were “managing an exit strategy out of our economy.”
He also accused banks of ignoring the informal sector and failing to tap into the growing sector. Chinamasa urged financial institutions to come up with innovative solutions.
Economic analyst Takunda Mugaga said Chinamasa was just talking like a politician, adding loans were very difficult to recover as evidenced by the high non performing loan book and the bleak economic outlook for 2014. He said government “did not have the moral right” to accuse banks given that currently it could not, through the central bank, function as “the lender of last resort”. He described Chinamasa’s accusations as “a case of hide and seek.”
Economic analyst Eric Bloch said Chinamasa’s attacks on banks were “unjust” given the environment that banks were operating in.
He said banks’ deposit base was very low as many depositors were keeping their money outside the formal banking sector as they fear the return of the Zimbabwean dollar.
Banks were experiencing the same overhead costs which constituted higher expenses with lower incomes.
Bloch said banks’ ability to extend lines of credit was also reduced by the depleted foreign currency reserves after being forced to surrender the yet to be repaid forex to the central bank in 2007. Owing to the current situation in the country, local banks are finding it difficult to access international lines of credit, he said.
The onus was on government and monetary regulators to revive the banking sector, he said.
Meanwhile, the World Bank has projected a 2014 growth rate of 4,2% for the Zimbabwean economy, lower than government’s projection of 6,1%. Speaking at the symposium, World Bank senior country economist Nadia Piffaretti said the growth would be mainly supported by agriculture.
She added the manufacturing sector would experience “a very slow sluggish growth” this year.
Piffaretti warned the interest rates being charged by banks would not be reduced in the short term and added that the protection of assets in Zimbabwe was perceived to be weak.
She said there was scope for improvement in various sectors of the country’s economy including tourism.
Also speaking at the symposium, Industry and Commerce minister Mike Bimha told delegates that there are plans to restructure the Industrial Development Corporation in line with government’s economic blueprint, Zim Asset.
“The Industrial Development Corporation (IDC) will be reconfigured and capacitated and probably now focus more on industrial development and probably shed off some of the current companies under IDC,’’ Bimha said. “It will be the institution to facilitate the industrial fund.”
Government was considering measures to protect industry from cheap imports that have hampered their operations, but they had to guard against protecting an inefficient industry as well as protecting an industry that will charge exorbitant prices for their products, he said.