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Business Reporter—
GOVERNMENT has capitalised the Reserve Bank of Zimbabwe to the tune of $100 million in a development that will usher confidence in the economy and restore the bank’s lender of last resort function, central bank governor Dr John Mangudya said yesterday. The capitalisation would, however, need to be supported by passing of the RBZ Debt Assumption Bill, Dr Mangudya said in the 2015 Monetary Policy presentation yesterday. The Bill, currently before Parliament, seeks to provide a legal framework for Government to take over the $1,1 billion Reserve Bank debt.

“I am pleased to advise that Government has capitalised the Reserve Bank to the tune of US$100 million using long dated debt instruments. The prayers of the Reserve Bank are for Parliament to pass the Bill, which is in its second reading, to cleanse the bank’s balance sheet and to bring normalcy in the financial sector,” said Dr Mangudya.

On Tuesday, the debate on the Bill divided the National Assembly along political lines with ZANU-PF legislators supporting its adoption while the MDCs were adamant in rejecting it.

Zanu-PF legislators threw their weight behind the Bill arguing it was accrued at a critical time when the Government was fighting the effects of Western imposed sanctions. The West imposed sanctions on Zimbabwe, estimated to have cost the economy over $40 billion, over a decade ago due to sharp political differences over land reform. However, opposition legislators argued that individuals who benefited from the schemes of the central bank should pay instead of burdening the taxpayers.

On the long awaited interbank facility, Dr Mangudya said it was now operational. The $200 million backed facility is supported by the African Export-Import Bank under the Afreximbank Trade Debt Backed Securities. It will also be used as a precursor programme for the lender of last resort function by the Reserve Bank, said Dr Mangudya.

The facility would be managed by the central bank as an agent bank for Afreximbank to manage the surplus and deficit participants’ requirements under AFTRADES. The initial borrowers under AFTRADES have already been assessed and approved by Afreximbank.

Dr Mangudya said lending to these approved banks would be strictly against acceptable collateral. The surplus banks’ risk under AFTRADES would be transferred offshore to Afreximbank.

“The Reserve Bank is pleased with this interbank market facility which is going to address the circulation of liquidity or funds within the local financial sector,” said Dr Mangudya.

Turning to non-performing loans, the governor said ratio to the total loans declined to 16 percent as at December 31 from 20 percent three months earlier. The decline in the NPL ratio noted over the quarter is largely attributable to the closure of Interfin and Allied banks and general improvement in loan quality in a few banks.

Dr Mangudya said the central bank has established a credit registry department to coordinate the collection of credit information from all banking and micro-finance institutions and maintain the databank for the credit registry. He said a number of Credit Reference Bureau project processes and activities are scheduled for execution over the next 12 months to ensure that the CRB is successfully rolled out.

The requisite amendments to the Banking Act have been approved by Cabinet to provide for adequate legislation to cover operations of the credit registry and appropriate regulations for the licensing and operation of private credit reference bureaus.

On liberalisation and compliance measures, companies are, with immediate effect, allowed to access offshore lines of credit of up to $10 million from $7,5 million without prior approval by the external loans and exchange control review committee.

As the country continues benefiting from international remittances inflows, the Reserve Bank has reviewed the current Exchange Control framework for international remittances and will introduce an enhanced and integrated framework with effect from April 2015.

Under the new framework, Zimbabwean registered money transfer operators and bureaux de change will be designated as Limited Authorised Dealers and will be allowed to conduct both inward and outward money transfers.

The new Exchange Control framework for international person-to-person remittances will be administered through a three-tier system. Total remittances from the Diaspora amounted to $840 million last year, compared to $790 million realised a year earlier.

The central bank also expressed concern over the abuse of individual or personal accounts to externalise business earnings under the pretext of ‘free funds’ for family upkeep, medical, thereby circumventing or evading taxes.

“This practice of promoting illicit financial flows is counterproductive and should be stopped. The RBZ has no appetite to put impediments on the conduct of free funds accounts but we cannot also remain naïve at the wanton abuse of the liberalised facility by a few nationalities,” said Dr Mangudya.