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Minister Chinamasa

Martin Kadzere Senior Business Reporter
GOVERNMENT is working on a bill that gives effect to the assumption of the Reserve Bank of Zimbabwe’s US$1,3 billion debt, Finance Minister Patrick Chinamasa has said. This follows the approval by Cabinet of the takeover of the US$1,35 billion RBZ debt by Government in what should pave the way for the smooth recapitalisation of the central bank and repayment of foreign currency account balances taken over during hyperinflation. The bill will be called Reserve Bank Debt Assumption Bill.

Minister Chinamasa said the bill would also seek to address issues surrounding the central bank’s lender of last resort function, the banker to Government clause, supervision to the financial services sector and interbank lending.

“The Ministry of Finance is trying to make sure that the RBZ comes back to normal operations,” said the minister.

Minister Chinamasa said the bill would need Cabinet approval before taken to the Parliament. The RBZ debt would be paid through issuance of Treasury Bills to banks from which the amounts were levied by the RBZ. This will be subject to the understanding that the banks will immediately settle small amounts owed to non-corporates of US$500 and below, without waiting for the maturity of the TBs.

The TBs will have a two to five year tenure as reflected in the accounts sitting with the affected banks.
The proposed interest rate for these instruments is between 3,5 percent and 5 percent per annum.

In addition, prescribed asset status and features like tax exemption may be granted to the instruments. The first maturity on the two-year TBs of US$25 million is due on December 31, 2013 while other maturities amounting to US$146 million are due next year.

Government will therefore repay the principal amounts on the TBs in staggers from 2015 onward.

Bankers have welcomed the decision by the Government, saying it was a confidence building measure. CBZ Holdings chief executive Dr John Mangudya said the move was also a confirmation that the country would continue with the multi-currency system.

“The move will unlock value for the country. It is a confidence building measure and confirmation that multi-currency system is staying,” said Dr Mangudya in an interview.

He added that since the TBs are tradable, the move will go a long way in improving liquidity of banks as they can trade the instruments in the interbank market.

AfrAsia Kingdom Bank founder Mr Nigel Chanakira said the move would pave way for a proper recapitalisation of the central bank.

“It is a critical move as it paves way for recapitalisation of the Reserve Bank so that it can start performing its role as lender of last resort to banks as well as making it a credible bankers to Government,” he said.