via New RBZ boss cites illiquidity as biggest threat to Zimbabwe’s economy May 8, 2014 NewsDay
THE new Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has pledged to do his utmost to help address challenges facing the economy which include low aggregate domestic demand, deterioration of the balance of payments, banking sector vulnerabilities and low industry capacity utilisation.
In his acceptance speech following his recent appointment, Mangudya said the lack of liquidity and limited circulation within the economy remained the biggest challenge facing the economy.
He said at the epicentre of the liquidity crunch was the country’s banking sector that has been operating without a lender of last resort for the past five years when the country adopted the multi- currencies regime.
“The Reserve Bank would need to attend to these challenges and come up with solutions for the betterment of the economy. The Reserve Bank would need to arrange for funding to capitalise itself and also becoming lender of last resort. We need to have a transparent and responsible central bank,” Mangudya said.
The central bank requires $150 million to perform the lender of last resort function.
Mangudya said the central bank was expected to promote strong and stable financial system and ensure that the multi-currency system needed to be buttressed and marinated to restore and enhance confidence and credibility.
“The multiple currency system is sine qua non for turning around the fortunes of the economy,” he said.
Mangudya said in the past three years people could not find jobs and companies could not pay each other as well as servicing loans with banks, tax revenues were going down and the tax base was narrowing. He said the greatest strength rested on relationship management, policy advice and the ability to put in place national beneficial financial structures to increase liquidity and resuscitate the economy so as to unlock value.
Mangudya took over from Gideon Gono, who had been at the helm of the central bank for the past decade.