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Business Reporter
Reserve Bank governor Dr John Mangudya’s maiden monetary policy statement is an audacious instrument that will address issues blighting banks and the economy at large, analysts have said.
In his monetary policy released on Monday, Dr Mangudya announced a cocktail of measures to set the economy back on growth path by stimulating liquidity and strengthening banking sector.

University of Zimbabwe professor of economics Tony Hawkins commended Dr Mangudya for measures to take bad loans from banks. The RBZ said the loans will be housed in a special purpose vehicle.

Dr Mangudya said the RBZ had formed a company, Zimbabwe Asset Management Corporation, to inherit non-performing loans from banks. The development is expected to clean up bank balance sheets in order to increase their risk appetite and lending to productive sectors.

Professor Hawkins also commended the central bank for taking measures to strengthen the capitalisation of the local banking sector.
Apart from requiring banks to meet minimum prescribed capital levels, Dr Mangudya introduced a three tier capitalization system for banks. The three tier system spells out the specific types of business to be conducted under each of the tiers of bank capitalization in Zimbabwe.

The UZ professor of economics also hailed Dr Mangudya’s measures to revert to basics in the conduct of business in the country. However, he quickly warned that the central bank would face huge challenges in raising funds to finance the takeover of bad loans.

“The cost of doing it is going to be the most difficult part. The company (ZAMACO) is going to buy the loans at a discount. How do you raise money, Government has no money,” he said.

Analysts contend that the option of using Treasury Bills, bonds and Diaspora inflows would add to Government’s already huge debt.
Government is battling to mobilise resources to finance the $4,2 billion 2014 National Budget amid dwindling tax revenue inflows as most companies are struggling to overcome economic challenges.

Economist Dr Eric Bloch said, overall, it was a good monetary policy statement, as it placed emphasis on investment promotion. This includes increasing clarity on the country’s equity laws, making land titles transferable, dealing with negative effects of sanctions, debt resolution and sticking to the IMF’s staff monitored programme.

Dr Bloch also lauded the central bank governor for his bold measures to ensure stability in the banking sector by addressing capitalisation issues and issues relating to clearing out bad loans.