Forex crisis weighs on Zimbabwe economy

Forex crisis weighs on Zimbabwe economy
Published: 15 March 2018
THE depletion of banks' nostros accounts, used to fund foreign payments, created serious settlement problems for international payments and resulted in most banks having a backlog for telegraphic transfers (TTs), according MBCA Bank.

The problems are part of an intensifying cash crisis in the country, which has resulted in depositors failing to withdraw cash from banks and companies failing to make international payments to suppliers.

The Reserve Bank of Zimbabwe last week said the country's foreign currency backlog had stretched as far as 12 months for many companies due to a deepening foreign currency crisis.

"The cash and nostro balances shortages are expected to weigh on the economy this year, should there be delays in attracting foreign investment and implementation of ease of doing business reforms," MDCA Bank chairman, Willard Zireva, said in a statement accompanying the bank's financial results for the year to December 31, 2017.

Nostro account refers to an account that a bank holds in a foreign country with another bank. They are frequently used to facilitate foreign exchange and trade transactions.

TTs are an electronic money transfer from a local bank to a bank account outside the country. They are the fastest mode of money transfer in a normal economy.

Zimbabwe's competitiveness as an economy and investment destination remains poor, only edging up to 159 from 161 out of 190 countries, according to the World Bank's latest Ease of Doing Business rankings.

"Official growth rate for next year is anticipated to be about 4,5 percent on the basis of government charting a new way forward, with economic and investment recovery underpinned by re-engagement with global partners," he said.

"The economy is also expected to be buoyed by the mining sector, with mineral exports expected to grow by 8,7 percent to $2,5 billion. Implementation of measures to create confidence and attract multilateral support and foreign direct investment will bode well for the sustainable economic development of the country," Zireva noted.

Importers, especially retailers, are fretting over delays in processing TTs to cross border suppliers, seriously affecting their ability to restock. Although there is a trend towards promotion of local products, Zimbabwe still depends on imports due to the fact that local industries have collapsed or are operating at very low capacity.

The situation has equally affected the mining, manufacturing and construction industries.

Parents and guardians paying school fees for children overseas were also being affected by the delays, which have resulted in children at foreign universities owing learning institutions.

MBCA Bank reported a 40 percent increase in profit after tax of $7,8 million for the year to December 31, 2017, from $5,6 million recorded the previous year, as a result of a 19 percent increase in non-interest income supported by an increased volume of transactions on new products.

The bank also benefited from volatility of some currencies as a result of developments on the global market. Net interest income increased from prior year position of $15 million to $16,5 million.

During the period under review, MBCA's total assets grew by 23 percent to $369 068 from $298 896 the previous year mainly as a result of the bank's investment in Aftrades and Treasury Bills.

Net loans and advances to clients constituted 27 percent of the total assets compared to 32 percent in 2016, while cash and cash equivalent decreased to 46 percent from 57 percent in 2016.

"Total deposits also registered a significant growth of 26 percent to $297 444 million in line with the bank's strategic deposit mobilisation initiatives to support asset growth," the bank's managing director, Charity Jinya, said.

MBCA is this year rebranding to Nedbank Zimbabwe Limited in an effort to leverage on the benefits from the Nedbank Group brand equity.

Going forward,  Jinya said the bank would continue leveraging on the group in order to provide service quality.

"The support of our existing clients will be key to our future growth," she said.
- fingaz
Tags: Forex,

Comments

Latest News

Latest Published Reports

Latest jobs