Afrexim injects $100m into economy

HARARE - Finance minister, Patrick Chinamasa is pinning hopes of fixing the liquidity crunch biting Zimbabwe on Africa Export and Import Bank (Afrexim Bank)’s $100 million interbank loan facility unveiled yesterday.

Speaking at the launch at a Harare hotel yesterday, Chinamasa said the facility will unlock deposits held by banks by making loans available for those financial intsructions banks with short-term liquidity challenges.

The interbank market has been mothballed since 2009, when the country ditched its worthless currency for a basket of multiple foreign currencies.

The Finance minister said the two-year facility, dubbed Aftrades, will improve cash flow by freeing surplus funds held by large banks to support smaller, struggling banks.

“By so doing, the liquidity which is lying idle will be used to stimulate the interbank market. This is expected to have a multiplier effect on the circulation of money in the system,”  Chinamasa said.

He said Afrexim has been supporting the Zimbabwean government during successive periods of economic turmoil.

Chinamasa said Afrexim has also provided trade-backed finance in support of the economy through facilities advanced to local banks.

“Afrexim has structured this facility as a measure to alleviate the liquidity challenges being experienced by the financial sector in Zimbabwe,” Chinamasa said.

“This facility, once implemented, will augment other policies and measures aimed at easing the liquidity challenges in the banking sector and the economy as a whole that the government is pursuing.

“It is now common knowledge even to the ordinary man on the street that our economy is facing liquidity challenges owing to a number of reasons, chief among them being the precarious balance of payment position. The liquidity challenge has manifested itself in the banking sector since the dollarisation.”

He said the situation was compounded by the Reserve Bank’s inability to provide liquidity support to banks in dire need of cash.

“Our banking sector was now divided into two tiers; with one tier comprising large banks with surplus liquidity and another tier of smaller and illiquid banks,” Chinamasa said.

He said this caused a lot of inconveniences to the banking system as a whole and to economic agents at large.

It is against this background that the government has engaged Afrexim to assist in developing a solution that will ensure convergence and reintegration of the banking system through the restoration of an interbank market. “The liquidity which is lying idle will be used to stimulate the interbank market,” Chinamasa said.

“This is expected to have a multiplier effect on the circulation of the money in the system. Thus, the facility is intended to alleviate the liquidity challenges in order to promote the proper functioning of the economy of Zimbabwe and the stability of the financial markets.”

He hoped the facility would also stabilise the financial sector.

“There is no miracle or quick fix solution to this challenge,” he said.

Jean-Louis Ekra, Afrexim president,  said the $100 million interbank facility was aimed at catalysing trade in Zimbabwe.

He said the facility is not a panacea to the liquidity challenges that the economy is facing but is expected to trigger the restart of interbank lending within the banking sector.

Charity Dhliwayo, the Reserve Bank of Zimbabwe acting governor, hailed Afrexim and the facility saying it will improve the financial situation in the country.

She said the loan will catalyse trade in Zimbabwe as the country is facing liquidity challenges.

“It (the facility) requires the participation of all economic players in the Reserve Bank and the (Finance) ministry to resolve the liquidity crisis in the country,” Dhliwayo said.

Comments (5)

Its a good idea provided ZANUPF doesnt do what it knows best- looting. Very soon we will see top of the range cars driven by party chefs. LETS LIVE WITHIN OUR MEANS AND ZIM WILL PROSPER. Starting with CEO of Zimbabwe- million dollar birthday parties can build a school mr President. If anything our current economy requires 323s as official cars not European cars. How much can we raise from all the Mercs driven by these underperforming ministers?? Mari tinayo Mr Chinamasa but hatigoni kuishandisa. How much did Tokwe Mukosi dam require and how much are u going to spent on luxury cars and useless presidential summit trips?

lee moyo - 23 March 2014

Good observation Moyo, Zim is rich but these zpf guys want kuguta vega. In diaspora ministers drive cheap cars, not Mercs and BMWs only in German cause they make them. Tru, mazda 323 shuld be the executive car across board,

Mahewo - 24 March 2014

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Mari tinayo Mr Chinamasa but hatigoni kuishandisa.

MOYO - 24 March 2014

Is it not that they say you have given us the mandate to keep looting. Is this the first time they have looted. It has always been aluta continua in looting that is why the president is not acting he thinks because we keep voting him in its normal to loot. He even wants to stand as president in 2018 because he knows that is what Zimbabweans want-looters. If they stop looting they will lose elections.

maita - 24 March 2014

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