Industry dares RBZ on IMF debt

HARARE - Industry has challenged Reserve Bank of Zimbabwe (RBZ) governor John Mangudya to tackle the country’s position in settling its external debts when he presents his Monetary Policy Statement (MPS) this month.

In a position paper released yesterday, the Zimbabwe National Chamber of Commerce (ZNCC) said debt assumption was one area the coming monetary policy cannot afford to ignore.

“In the last fall in Lima, Peru, the Treasury boss promised to pay $1,8 billon of the debt outstanding to the Britton Woods institutions.

“With the deadline of May in the horizon, a tangible payment strategy has to be clearly spelt out in the MPS given that it is the last policy measure to be announced before the deadline date,” the industry body said.

“This could mean a window of strives to be spelt out by the governor on the progress in raising offshore credit to finance the debt as domestic sources are dry as evidenced by waning revenue inflows according to Zimra numbers,” ZNCC added.

This comes as Zimbabwe last year made a commitment to pay principal debts to the International Monetary Fund (IMF), the World Bank and the African Development Bank by May this year.

However, critics say the country — currently struggling due to slowing economic growth, poor commodity prices that have hurt its mining industry and chronic power shortages that have decimated manufacturing capacity while its industry is in desperate need of cash to retool — lacks capacity to pay debts.

Zimbabwe, saddled with a $10 billion external debt, started defaulting on its debt to the international finance institutions in 1999 — the last year it got IMF loans — and is struggling to emerge from decade-long meltdown that lasted until 2008 when the economy declined by as much as 40 percent.

Without any balance of payment support and starved of foreign credit, Zimbabwe’s budget is funded 100 percent from tax collections and most of it goes towards salaries, leaving no money for infrastructure.

Meanwhile, ZNCC said considering the tight liquidity situation in the country, Mangudya must lower minimum capital requirements and group financial institutions into various categories.

“With a number of local banks desperate to attract tangible investors as the existing capital requirements appear like a pipe dream for them, it could be worthwhile to see them reviewing their status to either low tier financial institutions or merge amongst themselves.

“However it is also pertinent to appreciate that merging two or more institutionally weaker banks will not bring about a stronger bank,” ZNCC said.

The industry also noted by implication it would be less costly to take the route of market exit rather than buying time through courting “dreamland” strategic partners.

“It is our fervent belief that we have some local banks which are never meant to exist in this multi-currency regime as their model of business cannot definitely withstand the ever-bludgeoning informal economy whose unchallenged disposition to mobile banking is unmatched,” ZNCC added.

 

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