HARARE - Two banks are yet to sign an agreement that will pave way for the resumption of the interbank market, the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said.
This comes as the central bank missed a January 1, 2015 target to relaunch the system, phased out in 2009 upon introduction of the multi-currency regime.
Mangudya told businessdaily that the banks, which he could not name, had to go through some legal processes before acceding to the agreement.
“It (interbank system) operates more as a members club and everyone has to agree. Many banks have already signed up and only two are left to sign,” he said, adding that “we are expecting the interbank market to be up and running by the end of this month”.
The interbank market is a system which enables banks to extend loans to one another for a specified term.
Most interbank loans have maturities of one week or less, the majority being overnight.
Last year, Zimbabwe — in collaboration with the Africa Export and Import Bank (Afreximbank) — launched a $100 million facility to revive the interbank market after almost six years.
The move will allow the central bank to influence interest rates. Zimbabwe abandoned its currency in 2009 after hyperinflation rendered it worthless, and adopted a basket of foreign currencies dominated by the United States dollar and South Africa’s rand — leaving the RBZ no room to influence lending rates.
Since then, money market rates have spiralled out of control as a result, with bank deposits attracting returns as low as 0,15 percent while borrowing costs are quoted as high as 35 percent — a prohibitive rate for farmers and manufacturers.
Finance minister Patrick Chinamasa said the $100 million facility from Afreximbank was part of measures to improve liquidity in an economy facing declining export earnings and companies that are struggling to survive. The country has experienced liquidity challenges since 2009 but the situation worsened last year with some banks running out of cash.
Market experts say the financial sector has also remained fragile in the multi-currency regime owing to multiple factors that include lack of lender of last resort, unstable deposit base, under-capitalisation, poor corporate governance and high non-performing loans.
“By unlocking the interbank market, deficit banks could be afforded access to deposits in surplus banks thus allowing more circulation of money in the economy,” said South Africa-based economist Thandolwenkosi Sibaya.
Other analysts, however, feel that there are no quick fix solutions to the current problems that are crippling the economy.
The southern African country is currently facing multiple challenges that include precarious balance of payments, low export earnings, no credit lines, and no foreign direct investment.