Latest News Editor's Choice

News / National

Corporates bank balances worry RBZ

by Staff reporter
19 Feb 2020 at 06:32hrs | Views
ABOUT 50 percent of the ZW$34,5 billion total bank deposits belongs to corporates, which makes liquidity management critical to keep inflationary pressures under check.

Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, revealed this in his 2020 Monetary Policy Statement on Monday, where he explained that the bulk of bank deposits were concentrated on only 200 entities.

He said as at December 31, 2019, money supply as measured by total bank deposits stood at ZW$34,5 billion, ZW$22 billion (64 percent) in local currency and ZW$12,5 billion (US$785 million) or 36 percent in foreign currency.

"It is this liquidity or stock of money that is the key focus area that the bank is mandated to manage to ensure that it does not cause inflation and/or bring volatility to the exchange rate," said Dr Mangudya.  

"Focusing on liquidity management becomes even more critical especially in the context under which around 50 percent of this ZW$34,5 billion is concentrated on only 200 entities while the majority of the Zimbabwean population is struggling to make ends meet in an economy with a huge output gap."

As such, Dr Mangudya said the RBZ was geared to implement a comprehensive monetary targeting framework to regulate the amount of money supply in the economy and align it with the desired inflation and exchange rate levels.  

He said this framework will be operationalised through the use of existing open market operations tools that include treasury bills, savings bonds, corporate bonds, statutory reserve requirements and specific liquidity management instruments to deal with the uneven distribution of deposits in the economy.

"As at 31 December 2019, the outstanding savings bonds were ZW$1,9 billion, down from ZW$2,2 billion recorded over the same period in 2018.

"The statutory reserve balances amounted to ZW$918 million as at 31 December 2019, representing 129 percent increase from the ZW$401,5 million 2018 position," said Dr Mangudya.

Further, the RBZ boss said enhancing the Reuters Forex Interbank Market Tracker System was critical as it improves the operation and efficiency of the foreign exchange market through a more transparent foreign exchange trading platform.  

The Central Bank has advised that the electronic deal tracker system under the Reuters platform went live on a trial basis early December last year and accordingly, the next step was for banks to become market makers in the user-test environment.

This would help in ensuring that the new trading platform can handle the tasks in the live environment.

In this regard, Dr Mangudya said RBZ shall set aside appropriate foreign exchange resources to intervene and stabilise the market, as may be required once the enhanced interbank foreign exchange market becomes operational.

He said the monetary authority is also undertaking a further refinement of the activities of bureaux de change with an objective of strengthening their operations.

Source - chronicle