via RBZ to tackle industry competitiveness | The Herald February 11, 2015
RESERVE Bank of Zimbabwe Governor Dr John Mangudya will present his second monetary policy statement today, largely focusing on measures to enhance industry’s competitiveness and consolidating confidence in banking and the wider economy. While it is yet another policy instrument short on quantitative measures to inject pace into a sluggish economy, the policy will certainly be pregnant with a cocktail of proposals embracing solutions to the lack of competitiveness retarding industrial recovery.
There is little quantitative interventions the country can use to resolve problems such as an asphyxiating liquidity crisis after the country scrapped its inflation ravaged unit in 2009.
Dr Mangudya yesterday said that he had on several occasions indicated the need to ensure competitiveness of the domestic industry – one of the reasons why the central bank came up with the $50 million backed bond coins was to improve divisibility of the dollar.
“That is why we brought bond coins, we are trying to improve competitiveness of the economy, we are also trying to improve compliance with regulations,” Dr Mangudya said.
Since the introduction of the coins last December, prices have started trending downward.
Zimbabwe has witnessed phenomenal growth in imports since dollarisation in 2009, largely due to local industry’s incapacity to produce at world competitive cost and business people chasing allure of the dollar – the most popular international reserve currency.
Total imports amounted to $6,37 billion in 2014 and Zimbabwe now relies on the imports for an average of 60 percent of basic products consumed in the country, as industry is still smarting from an acute shortage of fresh capital and the decade long hyperinflation.
As such, Dr Mangudya’s monetary policy will zero in on solutions to restore industry competitiveness by identifying inherent cost drivers, measures to ensure compliance with regulatory requirements and mechanisms to bring back discipline in the economy.
The policy will also look at factors affecting the ease of doing business. The World Bank last year ranked Zimbabwe 171 out of 189 countries globally, partly explaining why it is the only one in the region failing to attract foreign capital.
Dr Mangudya yesterday also hinted at policy proposals specifically targeted at the banking sector, which should play a significant role in driving home the agenda of competitiveness, as this has a huge bearing on the cost of money to the domestic industry.
He said the policy will contain measures to “stabilise the banking sector” and seek to lower the number of distressed banking institutions to bring back confidence in banks, making sure that people get their money when they need it.
Already a number of financial institutions have folded since dollarisation due to serious financial distress and these include Genesis, Royal, Trust, Allied, Capital and Interfin. Detecting early signs of frailty in troubled banks will be key to protecting consumers.
The central bank also has the mammoth task of ensuring even tighter and foolproof systems to curtail growth of non-performing loans, which currently stand at about 20 percent, as borrowers struggle to repay due to the tightening macro-economic conditions.
Dr Mangudya has repeatedly said that the continued growth of non-performing loans, which now top $700 million, had the effect of restricting banks from lending to productive sectors.
As such, the central bank set up the Zimbabwe Asset Management Company to take up all secured loans to free up the banks’ balance sheets.
Already, the cost of obtaining finance in Zimbabwe is prohibitively high and averages 12 percent to 20 percent for short periods ranging from six months to 12 months, meaning few companies can borrow at such cost and tenure and still be able to pay back.
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