Maravi

(NEWZIMBABWE) Liquidity crisis temporary: Biti

Liquidity crisis temporary: Biti
10/02/2012 00:00:00
by Business Reporter

FINANCE Minister Tendai Biti has conceded that the country is facing a liquidity crisis but insisted the problem is only temporary adding treasury would soon announce measures deal with the situation.

Zimbabweans have been struggling to secure cash from local banks with the government forced to change the pay dates for civil servants in a bid to ease pressure on the country’s financial services sector.

"We have a temporary liquidity crisis in the economy and not a banking crisis. However, to ensure that we address the situation, I will in the course of next week announce measures to deal with the situation," Biti was quoted as saying by The Herald.

The country has struggled with cash shortages since 2009 when the government ditched the local dollar for more stable foreign currencies. The problem has not been helped by slower than expected economic recovery and the absence of foreign support.

Local banks are also said to have committed funds to illiquid assets as well as lending extensively to companies and individuals who are now failing to pay.

“Banks have lent lots of money to companies and individuals who are failing to repay,” a local bank executive told the weekly independent newspaper.

“That’s why the deposit to loan ratios are so unsustainably high. Banks loans have been used to finance relatively illiquid assets, while the institutions themselves fund their loans with short-term liabilities.”

Meanwhile Biti said the government would move to enable banks to access about US$82 million owed by the Reserve Bank of Zimbabwe as well as help restore the central bank’s lender of last resort capacity.

"We have agreed to monetise banks through the issuance of discounted National Certificate Deposit, which will have prescribed asset status and will be accompanied by the usual benefits, tax exemption and qualification as collateral for the lender of last resort facility," he said.

"Discussions are at an advanced stage to restore the lender of last resort function at the Reserve Bank."

Biti also said there was need for leaner banking sector and hinted possible consolidation of government’s interests in the ZABG, POSB, Agribank, ZB Holdings and CBZ.

"These assets must be leveraged to create value through the injection of outside capital and mergers and in any event banking is not the core business of Government," he said.

"We hope to emerge with fewer banks that can play a meaningful intermediary role in the economy.

“We are also pursuing market-related formulas that will allow not only our local banks but also industry and the mining sector to keep their money in the local banking system.

"We will put in place measures to ensure that Government and parastatals' business is fairly distributed amongst all banks to assure sustenance and buoyancy.”

Labels: NEOLIBERALISM, TENDAI BITI

posted by MrK @ 6:17 AM