via Zim liquidity crisis to worsen: RBZ governor – DailyNews Live 17 November 2014 by Ndakaziva Majaka
HARARE – Zimbabwe’s liquidity crisis is set to tighten due to banks’ reluctance to lend in the wake of “worrying non-performing loans (NPLs)”, the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said.
He said the level of NPLs in the country’s banking sector escalated to an average 20 percent in October from 18 percent in June this year.
“Liquidity is going to be tighter, not because there is no money, but the banks are now scared to give out money and all the money is sitting in the banks,” Mangudya told a Zimbabwe National Chamber of Commerce and Econometre Global Financial conference in the capital on Thursday.
“When the US dollar was introduced, people and banks alike thought they had arrived. They (banks) lent people money, but you as business are not repaying the loans,” he said.
He said the “NPLs have been increasing on a monthly basis even without new money being given out”. Mangudya added that the poorly performing economy and “financially undisciplined” Zimbabweans had forced banks into a state of “perpetual mistrust”.
“They are in it for the business, so after the behaviour being exhibited with so many companies filing for judicial management who can blame banks for the stance they have taken?” he questioned.
According to central bank statistics, the bad debts have risen from 1,6 percent in 2009 to 18,5 percent ($705 million) as at June 2014.
Mangudya said loans in issue stood at $4,05 billion as at September 30, 2014, while deposits rose from $1,36 billion in December 2009 to $5,2 billion in October 2014.
The central bank is currently mulling amendments to the Banking Act and has for years been considering setting up a credit reference bureau to curb NPLs.
Mangudya added that the new special coins to be introduced by the RBZ — in a bid to ease change problems — will go into circulation by mid-December this year.
He said the coin minting company in South Africa will start sending consignments of the coins in the last week of November.
This comes as Finance minister Patrick Chinamasa has insisted that the new coins are not linked to the reintroduction of the Zimbabwe dollar.
He said the coins — valued at par with the United States dollar — are meant to solve the problem of change in transacting.
“I am not a foolish minister, I do not make reckless decisions. I would be reckless to introduce the local currency at this juncture,” he said at a breakfast meeting in Harare recently.
“The small change introduction is in no way a subtle reintroduction of our currency,” he said, adding that the “plan will be backed by a $50 million facility to buttress the multi-currency regime”.
The Treasury chief noted that any currency needs an anchor in the form of production, “something Zimbabwe currently does not have, thus rendering it impractical” to reintroduce the infamous Zimbabwe dollar.
“Seriously, what is all this noise about these coins? They are simply meant for the convenience of consumers so that they do not eat sweets when they do not want to,”he said.
He further stated that the move could possibly reduce commodity prices.
“Everything is pegged at a dollar consequently, so the availability of small change will give commodities their real value and protect the consumer form being overcharged,” said Chinamasa.