RBZ capitalisation not priority: Mangudya

HARARE - Capitalisation of the central bank is not a priority at the moment as government has adopted a sequential approach to fixing the economy, Reserve Bank of Zimbabwe governor John Mangudya said.

He told businessdaily that curbing ballooning non-performing loans (NPLs) was of greater importance.

“Our plan is very simple if you do follow… we said as Zimbabwe we will deal with NPLs which is the albatross in Zimbabwe’s neck because if we do not do that banks will have no appetite for lending and the economy will not recover,” he said.

“We will follow a sequential approach… with the central bank capitalisation coming after everything else has been fixed,” Mangudya said.

He said after fixing the bad loans issue, a credit reference bureau was going to be set up, with resuming the interbank market and restoring the RBZ’s lender of last resort as a last priority.

“If we decide to capitalise the RBZ without solving the issue of NPLs the money will end up going into provisions and we will not have done anyone a favour,” he said.

In his 2015 National Budget, Finance minister Patrick Chinamasa announced Treasury has issued $110 million eight-year bonds to raise funds to capitalise the central bank.

This comes as the central bank has been failing to perform the key role of lender-of-last-resort since 2009 after government ditched the inflation-ravaged local dollar to adopt a multi-currency system — dominated by the United States greenback.

Chinamasa noted that between $150 million and $200 million is required to capitalise the apex bank.

“Capitalisation of the Reserve Bank is critical in facilitating it to discharge its mandate and to bring confidence in the financial sector,” he said in his 2015 National Budget

In a functional economy, a central bank’s role includes lending money to banks and other financial institutions when they have no other means to raise funds.


Comments (3)

So there is no harmony between the boss(Finance Minister) and the subordinate(RBZ Governor). Maybe it depends on who appoints who. Then you expect the market not to be confused. Ma1

Chaporomoka Chamukwenjere - 11 December 2014

Non performing loans(NPL)?? Can you please name and shame these debtors. Why can't they pay and what steps have been taken to recover the money loaned money?

Sigwell Moto - 11 December 2014

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