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Dr Mangudya

Martin Kadzere Senior Business Reporter
ABOUT $180 million has been lent to banks under the $200 million inter-bank facility meant to support financial institutions in deficit, The Reserve Bank of Zimbabwe said.

The lender of last resort type facility, underwritten by the Africa Export and Import Bank, enables banks with surplus liquidity to support those in deficit.

RBZ governor Dr John Mangudya said the Afreximbank Trade Debt Backed Securities, was a game changer in addressing financial stability through providing a liquidity support window for banks.

“This facility supported banks in an amount of $178,8 million as at 31 December 2015, for tenors of up to two years maturing on 13 February 2017, with initial support granted on March 19 2015,” said Dr Mangudya in the 2016 Monetary Policy Statement.

“This facility also brought discipline in the financial market as no funds are granted without security. The interest rates under this facility are a good benchmark for managing domestic interest rates as the Aftrades interest rates are basically the base lending rates and reflect the marginal cost of funds.”

Surplus banks earn interest of around 6,5 percent per annum while borrowing banks are charged a rate of around 8,5 percent.

The interbank market resumed early last year, having been dysfunctional since 2009 when the country adopted use of multi-currencies.

Dr Mangudya said while the multi-currency system or dollarization was an inhibiting factor to the full conduct of monetary policy by the central bank, it has managed to develop monetary policy tools consistent with dollarisation outside the conventional tools of monetary policy.

Apart from Aftrades, which has a lender of last resort characteristics, other non-conventional tools introduced by the central bank was the Zimbabwe Asset Management Corporation, which has stimulus package characteristics, interest rate guidelines, introduction of small denomination coins (bond coins) and demonetisation.

An amount of $10 million of bond coins is in circulation and they are a good store of value as they are indexed to the US$. They trade one to one or at par with the US$.

The demonetisation of the Zimbabwe dollar ended on September 30 2015. The purpose of demonetisation of the local unit was to promote consumer and business confidence by providing credibility to the multi-currency system and legally retiring the Z$.

A Statutory Instrument was promulgated to that effect on 12 June 2015. An amount of $9 million out of a budget of $20 million was converted at the closure of the demonetisation programme.