'Measures being taken to address cash shortages'

FINANCE and Economic Development Minister Patrick Chinamasa has said Government is working on a raft of measures aimed at improving the availability of cash in the country's banking system.

Presenting the 2018 National Budget Statement in Parliament yesterday, Minister Chinamasa said measures were in place to restore confidence in the financial sector by introducing a variety of measures aimed at addressing the biting cash shortages.

"Government proposes to restore public confidence in the financial sector by implementing the following measures in order to promote domestic service.

We need to improve the availability of cash for minimal withdrawals. We need to improve interest rates on investments or deposits and reducing services charges on all accounts," he said.

Minister Chinamasa said exports remained the main source of the country's foreign exchange and liquidity with 86 percent of export proceeds coming from mining and tobacco. He said the Government will introduce fiscal incentives targeting other sectors such as horticulture, tourism and manufacturing to boost and diversity the country's export market.

"We need to plug leakages in imports and exports receipts. We also need to expedite the removal of the identified export infringement, which include intertwined regulations, multiple and fragmented export documentation points. We will also need to enforce the pronounced amnesty on the repatriation of externalised funds and assets as well as extending amnesty on depositing cash hoarded in the country," he said.

The minister urged the public to continue utilising plastic money and available mobile money transfer facilities. He said money creation, through domestic money market instruments, which do not match with available foreign currency, only serves to weaken the value of the same instruments, translating into rapid build-up in inflationary pressures, to the detriment of financial and macro-economic stability.

"This has seen growing mis-matches between electronic money balances and the stock of real foreign exchange balances, as reflected by cash holdings and nostro balances of banks. The mis-match between the supply and demand for foreign exchange has also led to the emergence of foreign exchange premiums in the market," he said.

Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mangudya, in his Mid-Term Monetary Policy Statement, said the central bank secured close to $1 billion in facilities to ease foreign currency shortages, while it has selectively increased export incentives as part of efforts to stimulate production.

To deal with the challenges, Dr Mangudya extended the bond notes facility by another $300 million through a standby liquidity facility (The Stand-by Liquidity Support) from AfreximBank, bringing the total bond notes in issue to $500 million. The previous $200 million facility which kick-started the export incentive is almost exhausted after a total of $175 million (as at June 30, 2017) had been paid out under the export incentive scheme in the form of bond notes against a payable amount of $187,7 million.