RBZ acts on cash crunch

THE Reserve Bank of Zimbabwe has enlisted support from Afreximbank to put in place a nostro and export support facility as part of efforts to mitigate the cash crisis in the economy. RBZ Governor Dr John Mangudya said the facility will help stabilise the cyclical cash cycle in an economy that has domesticated foreign currencies to make its official currency.

Zimbabwe adopted a basket of currencies dominated by the US dollar in February 2009 after its domestic currency fell victim to the decade long ravages of hyperinflation.

"I personally made the request to Afreximbank after previously supporting our interbank, artisanal gold miners and grain imports among others, that we need this facility," he said.

The facility will bridge the gap between the high demand for cash, October to February, when only gold and platinum are major export earners before tobacco chips in around March.

Afreximbank president Dr Benedict Okey Oramah, visiting Zimbabwe for the first time since his appointment in September last year, pledged to help Zimbabwe stem out its liquidity crisis.

He stressed that only after resolving the liquidity issues would Zimbabwe realise the optimal benefits of the widespread economic reforms that Government has been working on.

"Many people ask why we continue to support Zimbabwe (given its economic situation), and we have asked why not. Zimbabwe has never defaulted on us," he said.

Apart from the $200 million interbank facility, $200 million for grain imports and $150 million for small-scale gold mining, Afreximbank will unveil $819 million debt bridging finance to help in the arrears clearance strategy.

The African Export and Import Bank (Afreximbank) disburses an average of $500 million per annum through various financing channels across various sectors of the economy.

Dr Mangudya said the Afreximbank facility should help relieve pressure on the nostros, foreign based bank accounts used to support transactions abroad, exerted by a huge import bill.

The central bank Governor said the facility would be termed "Afreximbank-RBZ Counter Cyclical Nostro and Export Support Facility, designed to improve liquidity in the economy.

"Its intention is to mitigate the cyclical problems and challenges faced in the economy, as a result of the commodity price fall on nostros and bridge the gap between inflows of major export earnings that fund the nostros," the Governor said.

Dr Mangudya said the ultimate aim is to continue to boost confidence in the banking sector, which is risk to the bank left unmitigated and ensure that nostros do not run dry.

Apart from the effect of imports on nostros, which sucks liquidity from the banks, tobacco, end of month salaries and gold miners have also been a factor.

"This situation has now been exacerbated by the opening of the tobacco auction floors whereby small-scale miners demand for cash is high. This is over and above demand for cash of about $5 million per week by artisanal gold miners," the RBZ chief said.

He said this follows astronomical increase in gold production from the small miners to 40 percent of the 5 tonnes that have been produced in the first three months of the year. Most unbanked artisanal small-scale miners want spot cash after selling their gold.

The Governor said this was the reason why the central bank is advocating financial inclusion to motivate banking of the unbanked to reduce the demand for physical cash.

"It is against this background that the Reserve Bank has authorised and directed that tobacco farmers be paid through normal banking channels when they sell the tobacco. The bank is also on a drive to promote the use of plastic money to mitigate demand for cash."

The RBZ chief said the cash squeeze justified

the need to rally behind the Buy Zimbabwe campaign.