Zim seeks IMF technical assistance

HARARE - Zimbabwe is seeking the International Monetary Fund (IMF)’s technical assistance in bolstering its Treasury management as the country reengages the central bank as its banker.

The government is moving its exchequer account from CBZ Bank (CBZ) to the Reserve Bank of Zimbabwe (RBZ).

“With this reform in mind, RBZ staff has for some time now been incorporated into the ministry’s cash-flow forecasting and management team. In this regard, we will be calling on IMF’s technical assistance to strengthen the government’s Treasury management function,”

Finance minister Patrick Chinamasa and RBZ governor John Mangudya said in a July 01, 2014 letter to IMF managing director Christine Lagarde.

The pair said that as they approach the end of the transition period, they endeavour to “minimise side effects on banking system liquidity and on CBZ’s own liquidity management”.

They said they will proceed on the basis of allowing the balance in the CBZ account to gradually decline while direct tax revenue will be directed to the new RBZ account.

“The transition arrangements will remain in effect while we complete the link between the RBZ’s systems and the Public Finance Management Information System (PFMIS) at the ministry,” they said.

The transition process, to commence in tandem with the policy measures such as the RBZ Debt Assumption Bill, was presented before Parliament in April 2014.

It provides for the restructuring of the RBZ’s balance sheet by transferring its non-core domestic and foreign liabilities totalling $1,35 billion to government.

Both the Treasury chief and Mangudya, former CBZ’s chief executive, added that the debt transition process will be coupled with the introduction of a $100 million interbank liquidity facility provided by the African Export-Import Bank (Afreximbank).

“Under this facility, participating banks in temporary need of liquidity will be able to pledge as collateral eligible assets in their portfolios. Banks providing the liquidity will be protected by accepting as collateral securities issued by Afreximbank, which enjoys a BBB rating,” they said.

The pair added that while government stands ready to support this mechanism, its possible exposure is strictly limited by the design of the facility.

Economic analysts say if the RBZ is to be enabled to fulfil its essential role in the Zimbabwean economy —  as is the case with central banks in many countries — and if confidence is to be restored in the economy, the overdue recapitalisation of the RBZ and its redemption from immense indebtedness must be effectively addressed with utmost urgency.

“Should these and ancillary appropriate actions be pursued, the RBZ will transform into an effective, autonomous central bank, enabling it to fulfil, directly and indirectly, a substantive role in restoring confidence in the banking sector by motivating foreign investment.

In general this will accelerate a significant upturn of the economy, and maintain the attained economic revival,” said Bulawayo-based economist Eric Bloch.

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