The Reserve Bank of Zimbabwe (RBZ) says a $70 million nostro stabilisation facility would be disbursed at the end of the month, to deal with current delays in foreign payments, among a raft of measures to stabilise the economy.
BY NDAMU SANDU
In his monetary policy statement released yesterday, RBZ governor, John Mangudya said the stabilisation facility would “augment the foreign exchange resources in the banks’ nostro accounts, whilst awaiting the opening of the tobacco and cotton selling season”.
“Whilst the country has $250 million in the nostro accounts and $120 million in physical cash at banks, the bank, using the model, estimates that there is around $600 million circulating in the economy,” he said.
“The main reason behind the substantial amount of cash circulating in the economy includes the treatment of foreign currency as a store of value, low business sentiment or confidence within the economy, high informalisation and financial exclusion.”
The facility comes at a time companies have been struggling to make foreign currency payments for raw materials due to the depletion of the nostro accounts.
Mangudya directed banks to reduce lending rates to not more than 12% per annum with effect from April 1 to support the productive sectors of the economy.
“… all banking institutions are required to ensure that lending interest rates should not exceed 12% per annum and that bank charges that include application fees, facility fees and administration fee, should not exceed 3%,” he said.
Mangudya directed banks to submit, by the end of the month, a detailed report indicating their current level of charges for account maintenance and ledger fees as at December 31, 2016, adding that the apex bank would continue to monitor bank charges to ensure access to affordable banking services and at the same time promote the use of plastic money.
He prescribed that all banks have to review interest paid on deposits and to submit a report to the RBZ detailing their deposit profiles and proposed interest rates on deposits to promote a savings culture. This has to be done by March 31.
The central bank chief implored RBZ to preserve foreign exchange in nostro accounts by enforcing market and institutional discipline and domesticating the settlement of local card transactions on international card switches.
The measure, Mangudya said, has been necessitated by the need to ensure that nostro accounts are used for foreign payments and that domestic transactions are settled locally through platforms such as RTGS, ZimSwitch, Visa, MasterCard, local mobile banking and/or cash and bond notes.
“Utilising nostro accounts to settle domestic transactions put unnecessary pressure on the country’s foreign exchange reserves that should ideally be used for international or offshore payments,” he said adding that $206, million for card and DStv transactions paid through the nostro accounts between July-December 2016.
“Spending more foreign exchange on DStv subscriptions than on raw materials to produce cooking oil, for example, is not only counterproductive but also illogical,” he said.
Mangudya said his measures were necessary as “the country needs to pursue a new economic development model that is anchored on an export- led growth strategy to balance exports and imports, while simultaneously addressing the structural rigidities besetting the economy in order to expand output”.