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crunch hound banks
Sandu, The Standard (Zimbabwe)
Banks have proposed
the setting up of an emergency fund to bail out institutions among
a raft of measures to stem the prevailing liquidity challenges.
This comes as
some banks, mostly indigenous, have put a cap on withdrawals while
their automated teller machines are not dispensing cash.
has been made worse by government which seems clueless on resolving
the liquidity challenges whose systemic effects were being felt
across all the sectors of the economy.
with banking executives, who requested anonymity due to the delicate
nature of the liquidity squeeze, The Standard was told yesterday
the interventions have to come as a matter of urgency to avoid the
situation escalating to crisis levels.
They said if
the situation was to deteriorate further, the impact on the economy
would be devastating and the interventions required would be beyond
the reach of the cash-strapped government.
If the situation
was allowed to persist, the biggest casualties would be the small
indigenous banks that have been extending loans to the productive
sectors of the economy.
of such [indigenous] banks would fly in the face of the policy of
government to support indigenisation,” an executive said.
concurred: “Allowing the collapse of those banks that support
national programmes is akin to confirming the fact that banks should
in future follow stricter risk management policies which curtails
lending to sectors of the economy.”
that the collapse of any bank would lead to the wiping out of savings
of smaller depositors such as civil servants, schools, churches,
hospitals and parastatals with devastating social and economic end
also nurse institutions deemed depressed with interventions to maintain
public confidence in the banking sector.
sector is still smarting from huge withdrawals just before the
July 31 harmonised elections. It is estimated that US$1 billion
had been withdrawn from the banks and the money is still outside
the formal banking channels.
to bankers, has fuelled the liquidity challenges.
are not using your money no one will use it unlike in banks where
it can be used by someone else. If that money is in the banks it
unlocks other transactions and this is the multiplier effect of
putting money in the bank,” a banker said yesterday.
“Confidence is an invisible asset of the economy.”
banker cautioned that those holding money outside the banks were
not in a hurry to deposit it due to lack of confidence in the sector.
He said the holding of money outside the banking system was a perception
In the past
the central bank raided foreign currency accounts of companies at
various banks to fund critical government needs. The Ministry of
Finance recently said it would assume that debt but has not prescribed
how it would do so.
of the debt should be done now to avoid market speculation,”
an executive with a listed bank said.
He said government
should shoulder the blame by providing policy certainty after pushing
the national budget, supposed to be announced this month, to next
budget gives direction to where the government is going. It helps
companies to align their plans to budgets.”
the underperformance of exports has meant that the country imports
more using the little money available.
plug the trade deficit hole through foreign direct investments and
money from donors.
struggling to tap into foreign direct investment inflows as investors
are wary of the indigenisation legislation that gives locals control
ahead of foreigners who would have brought the money required to
challenges force company closures
have manifested in company closures as banks are unable to offer
long-term working capital for retooling and boosting production.
It has resulted in high default rate by companies and individuals.
by borrowers to pay back loans impacts directly banks’ ability
to service depositors maturing investments,” an investment
banker said yesterday.
loans reached US$500 million in the first half of the year amid
fears that banks would curtail lending. The percentage of non-performing
loans out of total loans and advances was 13% during the period,
the highest in Southern Africa.
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