Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

***The views expressed in the articles published on this website DO NOT necessarily express the views of the Commercial Farmers' Union.***

Local banks get lifeline

Local banks get lifeline

Saturday, 17 March 2012 15:50

GOVERNMENT is working with the African Export-Import Bank (Afreximbank) to 
introduce a financial instrument that can be used as security in inter-bank 

Information obtained on Friday shows that the instrument will be backed by 
performing trade-related loans of banks which could then be used as security 
in inter-bank placements.

“In this way, it is expected that banks with deficit liquidity will be able 
to access liquidity from those with surplus. We believe that the anticipated 
velocity and multiplier effect will greatly ameliorate the short term 
liquidity challenges that banks are facing,” Gift Simwaka, Afreximbank’s 
regional manager for southern Africa, said on Friday.

Simwaka said while the move is not a panacea to the liquidity problems, “it 
will supplement the other measures the authorities are taking to deal with 
the liquidity situation, and the bank (Afreximbank) stands ready to support 
these efforts within the scope of its mandate.”

Simwaka said the US$80 million trade-backed liquidity support facility is 
being worked out and should be implemented as soon as all the necessary 
formalities are completed.

Once the underlying processes, including approvals are completed, the debt 
instruments will be issued.

Simwaka said the targeted tenure is up to two years, but the coupon rate 
(interest rate) is yet to be agreed.

He said there would not be one rate but several “reflecting tenor, as some 
instruments may be of a one-year tenor, as well as the discount associated 
with the underlying trade assets from selected banks that will secure the 
bonds on a bank-to-bank basis”.

The proposed trade-backed liquidity support facility is set to complement 
current efforts to improve the liquidity situation which has haunted the 
banking sector.

Last month, Treasury and the Reserve Bank of Zimbabwe (RBZ) introduced a 
raft of measures to ease the problems.

The Ministry of Finance gave RBZ US$20 million to perform its lender of last 
resort role. This means that RBZ now has US$27 million to bail out banks in 
the event of liquidity mismatches. Finance minister Tendai Biti said last 
week the fund would rise to US$30 million.

RBZ also instructed banks to keep 25% of their Foreign Currency Account 
balances in nostro accounts and bring the remainder onshore for on-lending.

As a result of that directive, banks have agreed to remit US$200 million, a 
move that would ease the liquidity challenges.

RBZ and banks have also reached an agreement over the US$83,58 million owed 
to banks as statutory reserves.

The central bank scrapped statutory reserves — the amount of money any bank 
has to maintain with the central bank at 0% for every deposit received from 
a customer — in June 2010 as “part of risk containment measures in the 
banking system”.

The deal will result in RBZ boss, Gideon Gono, issuing instruments against 
the amounts owed to banks. The instruments will have tenors of two, three 
and four years with interest rates of 2,5%, 3% and 3,5% respectively.

Tradable paper promotes inter-bank trading: Biti

Biti said the instruments will promote inter-bank trading and allow banks to 
use tradable paper as security when accessing the lender of last resort 

This will ensure utilisation of resources which banks have been failing to 

Biti said institutions not willing to participate in the scheme would have 
an option of being issued with 15-year bonds at an interest of 3% per annum.
Since November, banks have been facing problems resulting in gridlock 
especially in Real Time Gross Settlement platform.

The situation has been compounded by the nature of deposits where over 50% 
of the total deposits are demand and short-term, reflecting a weak deposit 


Tobacco sales fetch US$258m

Tobacco sales fetch US$258m    Herald 3/7/2020 Herald Reporter Tobacco sales have reached 110 million kilogrammes worth US$258 million, with deliveries to contract companies and

Read More »

Agric tops micro-finance loan book

Agric tops micro-finance loan book  Herald 12/9/2019   Mr Chitambo Fradreck Gorwe Business Reporter Good rains anticipated countrywide during the 2019/20 farming season, have seen agriculture

Read More »

New Posts: