Zimbabwe banking ‘crippled by liquidity crunch’

via Zim banking ‘crippled by liquidity crunch’ | Fin24 May 21 2014 by Malcom Sharara

Zimbabwe’s banking coffers leave little room for sustainable recovery and growth, statistics from the country’s central bank show.

According to the Reserve Bank of Zimbabwe’s (RBZ’s) March monthly review, short-term deposits accounted for over 83% of money supply in the country’s banking sector.

This has meant productive sectors are starved of much-needed loans.

In the period under review credit to the private sector declined by 0.5%, from US$3 627.0m in February 2014 to $3 610.4m in March 2014.

The RBZ said the slowdown reflects constrained lending by banks on the back of liquidity challenges, a low deposit base and risk aversion due to increasing non-performing loans in the banking sector.

Non-performing loans have since reached 17% of total loans advanced.

Of the $3 610.4m advanced to the private sector, key sectors such as mining received only 6.3% while construction received 1.6%.

“Mining and construction industries which require long term loans, received smaller proportion of the loans and advances, as the banking sector continues to be crippled by liquidity crunch,” said the RBZ.

The mining sector is touted by the Zimbabwean government as key to the country’s economic recovery and growth prospects, and yet the sector is not getting much funding from both local and foreign financial institutions.

Of the credit to the private sector, only 7.8% was utilised for capital expenditures which again points to limited growth prospects.

Zimbabwe will thus have to rely on external funding to kickstart the economy but this has been hampered by the external debt overhang amounting $6.4bn.

The International Monetary Fund and the World Bank have since said Zimbabwe will have to clear its debts to obtain any assistance.

The World Bank also said Zimbabwe does not qualify for debt relief under the Heavily Indebted Poor Countries strategy, because it has capacity for a sustainable economic recovery.

Several countries have also said they are not in a position to help the country, with Brazil this week saying “the southern African nation is too rich to beg for financial assistance.”

@Fin24

COMMENTS

WORDPRESS: 10
  • comment-avatar
    Shamhu YeNhanzva 6 years ago

    Anyone surprised by this? ZANU makes laws that discourage investment & they are shocked when lack of investments turns into a cash-strapped economy. Whoever this Einstein is that’s advising ZANU on economic policies is doing a great job…[NOT]

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    Tinomunamataishe 6 years ago

    The country may be “rich” but that wealth is all in the hands of the ruling elite who do whatever they want, whenever they want. The general populace wallows in abject poverty unless they escape to another country.

    The rich in Zimbabwe are the leaders and not the country. They could wipe off that debt if they wanted.

    These leaders can afford to fly abroad for treatment every time they feel a little itch or ache. For them local facilities are not good enough.
    They can afford to have houses that have so many bedrooms it looks like a maze.

    They have garages that can easily rival any car dealership around the world. The kind of opulence is not even seen in developed countries but they don’t care.

    Corruption has blinded them so much that they cannot see that the majority of people can hardly afford to sustain a single day, let alone a week.

    And all this with a begging bowl to other countries – where they feign poverty when deep inside it’s a big grin about how much travel allowances they will get from that excursion and the next sumptuous rendezvous.

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    John Thomas 6 years ago

    ZANU is not and never has been capable of running this country. They will continue making the mess worse as long as they are in power. In spite of their degrees these people are very backward and lack understanding of very simple things. ZANU must go. It is time for others to try. Almost anybody else will do a better job, even a dummy like Tsvangirai.

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    They keep on about the number of degrees they have, Mugabe is always going on about it. Most of the degrees were taken while they were in Rhodesian prisons ( now even the prisoners are starving)

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    It shows that the Rhodesian government had good economic policies that is why they could afford to educate their prisoners. But now they can t afford to feed them.

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    simbi 6 years ago

    Well said Mahlaba

  • comment-avatar
    Straight Shooter 6 years ago

    We call it “GUKURAHUNDI BANKING”!!!

  • comment-avatar
    Charles Chamunorwa 6 years ago

    Indigenisation is hurting the ordinary men on the street most

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    munzwa 6 years ago

    NO NO guys its the sanctions, lets not forget the sanctions, please please don’t forget the sanctions…