'Liquidity crisis is a figment of local media imagination'

Published: 03 December 2013

The Bankers Association of Zimbabwe says reports that a whopping $700 million left the domestic banking sector to perceived safer offshore havens soon after the harmonised elections held on July 31, was just but fallacious imagination.

BAZ president Mr George Guvamatanga said in an interview that the suffocating liquidity crisis pervading the entire economy was a figment of local media imagination as available statistics showed that nothing of that sort had happened.

"There is no $700 million that left the banking sector. The liquidity crisis is simply because we are importing more than what we are exporting and attracting less in terms of foreign direct investment, these (exports and FDI) are the sources of liquidity.

"(Statistics show that) in May (2013) deposits were $3,5 billion, $3,5 billion in July, $3,4 billion in August and $3,4 billion in September. There is no $700 million that left the sector, where is this coming from?" he said.

Mr Guvamatanga said reports circulating in the country about cause of the liquidity crisis were based on wrong assumptions and instruments of measuring the prevailing situation, which resulted in some people deducing wrong conclusions.

While Zimbabwe is undeniably facing a choking cash crunch, the bottom line is that Zimbabwe is paying heavily because of a huge import bill for a country that does not print its own currency, has a weak export base and negligible foreign inflows.

According to statistics from the Reserve Bank of Zimbabwe imports totaled $6,6 billion for the nine months to September 2013 compared to $2,3 billion exports.

Commenting on the assumption by Government of the $1,3 billion RBZ debt the BAZ leader said the move would go a long way in enhancing confidence in the local banking sector.

This follows the approval by Cabinet for Government to take over the debt to allow for recapitalization of the apex bank and enable it to resume its normal duties.

The debt had become an albatross on the back of the central bank and stifled its capacity to intervene in the banking sector in influencing rates and liquidity.

It is expected that the debt assumption will inspire confidence in companies and individuals alike to channel their deposits into banks with an estimated $4 billion thought to be circulating outside the banks due to lack of confidence in banks.

The BAZ president said long queues seen at banks around the country were also not necessarily a reflection of a crisis engulfing the entire banks as some of them were only a result of logistical delays in importing notes from the US.

Against this background, Mr Guvamatanga said the banking sector was generally safe and sound and that the liquidity challenges Zimbabwe was facing, though serious, were minor compared to the macro-economic upheavals it went through.

"There are various initiatives to finding a solution to the liquidity crisis. As BAZ we have always said that we need to engage the broader global players in the (financial) market and (also) improve the level of our exports," the BAZ boss said.
- herald