JOHANNESBURG – Zimbabwe rolled out a raft of measures this week to boost stability in the country's financial sector, decimated by its economic crisis and investor flight.
Finance Minister Tendai Biti announced plans to issue a new form of bonds to Zimbabwe-based banks in return for about $84 million in statutory deposits that went missing from the reserve bank when the country switched the dollar in 2009 to halt hyperinflation.
"The issuance of discountable paper instruments against the Reserve Bank Statutory Reserve liabilities is against the background of our limited fiscal space," Biti said in a statement Wednesday.
On Thursday, Reserve Bank Governor Gideon Gono welcomed the treasury's assistance in reimbursing banks but didn't explain what happened to the statutory reserves.
Gono also said that by the end of June banks will be required to keep 70% of their assets in the country, rather than in secondary accounts in foreign banks, a measure that he said will help boost liquidity and credit available in Zimbabwe.
The reserve bank is some $1.1 billion in debt to development banks and other reserve banks in Africa. Gono has said the reserve bank has almost no assets because the federal government hasn't repaid it for some $1.5 billion in projects financed in recent years.
The shift from the Zimbabwe dollar to using foreign currency as legal tender, primarily the U.S. dollar, halted hyperinflation but also crippled the reserve bank.
That's because most of the bank's assets were in the currency that it regulated, the Zimbabwe dollar. Without a currency to print and circulate, the bank has also lost one of its most important levers over the economy, its role as lender of last resort to local banks.
The liquidity crunch has undermined an anemic economic recovery under way in Zimbabwe, at a time when the uncertain political environment is deterring investors. The 87-year-old president, Robert Mugabe, is battling political opponents over a date for the next presidential elections, betting that his health will hold long enough to win another six-year term.
Biti said the treasury is creating a $100 million fund to restore the reserve bank's ability to function as the lender of last resort as of March 1. Zimbabwe's treasury will contribute $27 million of its own money to the fund, Biti said.
The African Export-Import Bank is in discussions with the government to contribute the remainder of the guarantees, said Gift Simwaka, the bank's manager for southern Africa.
Gono, the reserve bank governor, also said that five of Zimbabwe's locally registered banks have capital reserves below a required $15 million, and gave them until the end of March to recapitalize or merge with other banks.
"No undercapitalized banking institution will remain operational in the banking sector with effect from 1 April 2012," Gono said.
foxbusiness.com
Finance Minister Tendai Biti announced plans to issue a new form of bonds to Zimbabwe-based banks in return for about $84 million in statutory deposits that went missing from the reserve bank when the country switched the dollar in 2009 to halt hyperinflation.
"The issuance of discountable paper instruments against the Reserve Bank Statutory Reserve liabilities is against the background of our limited fiscal space," Biti said in a statement Wednesday.
On Thursday, Reserve Bank Governor Gideon Gono welcomed the treasury's assistance in reimbursing banks but didn't explain what happened to the statutory reserves.
Gono also said that by the end of June banks will be required to keep 70% of their assets in the country, rather than in secondary accounts in foreign banks, a measure that he said will help boost liquidity and credit available in Zimbabwe.
The reserve bank is some $1.1 billion in debt to development banks and other reserve banks in Africa. Gono has said the reserve bank has almost no assets because the federal government hasn't repaid it for some $1.5 billion in projects financed in recent years.
The shift from the Zimbabwe dollar to using foreign currency as legal tender, primarily the U.S. dollar, halted hyperinflation but also crippled the reserve bank.
That's because most of the bank's assets were in the currency that it regulated, the Zimbabwe dollar. Without a currency to print and circulate, the bank has also lost one of its most important levers over the economy, its role as lender of last resort to local banks.
The liquidity crunch has undermined an anemic economic recovery under way in Zimbabwe, at a time when the uncertain political environment is deterring investors. The 87-year-old president, Robert Mugabe, is battling political opponents over a date for the next presidential elections, betting that his health will hold long enough to win another six-year term.
Biti said the treasury is creating a $100 million fund to restore the reserve bank's ability to function as the lender of last resort as of March 1. Zimbabwe's treasury will contribute $27 million of its own money to the fund, Biti said.
The African Export-Import Bank is in discussions with the government to contribute the remainder of the guarantees, said Gift Simwaka, the bank's manager for southern Africa.
Gono, the reserve bank governor, also said that five of Zimbabwe's locally registered banks have capital reserves below a required $15 million, and gave them until the end of March to recapitalize or merge with other banks.
"No undercapitalized banking institution will remain operational in the banking sector with effect from 1 April 2012," Gono said.
foxbusiness.com
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