Addressing guests at a luncheon hosted by the St Luke’s Anglican Church on the importance of the impending bond notes as a short-term measure to meeting the liquidity challenges on Sunday, Mangudya said the situation was dire.
Foreign financial institutions are closing offshore accounts held by local banks, exacerbating the liquidity situation in the country, Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya has said.
He said one of the reasons why there was a liquidity crisis was that the country was double-dipping by using nostro accounts for foreign payments, and using the money for local cash demands.
“I want to be honest with you people. I should not be telling you this, but the banks are operating under difficult circumstances right now. As we speak, some of the foreign banks are closing our offshore accounts, with the Bank of China being an example. The reason why I do not tell you some of the things is that you would panic . . .
Afreximbank is the only bank in the world that has been helping us,” Mangudya said.
Afreximbank are guarantors of the $200 million export incentive facility, where exporters will get an additional 5% in a bid to boost local production.
Exports are the biggest source of liquidity, constituting 60% of cash flow.
Mangudya said since 2009, Zimbabwe had experienced a $2,5 billion trading deficit per annum, meaning to date the country has lost $20 billion.
“Our situation is even worse because we are using a reserve currency for both local and foreign transactions, which is unsustainable. RBZ imports between $10 and $15 million cash weekly on top of what is imported by banks to meet the requirements of the market,” financial expert, Persistence Gwanyanya said.
“Ideally, this money should be used for foreign payments and that’s the reason why RBZ now wants to introduce bond notes, so that they take care of local payments, while minimising the occurrence of externalisation, as one cannot use the bond notes outside the borders of Zimbabwe.”
So dire is the situation that banks have been forced to dip into the nostro accounts to satisfy the United States dollar market on top of making foreign transactions.
A nostro account is an account that a local bank holds in foreign currency in another bank.
The money held within that account acts as a reserve for the local bank in case it runs out of cash.
The depleting nostros have jolted RBZ into action and is set to receive $545m in nostro stabilisation facilities.
Analysts have urged Zimbabwe to use the South African rand, which is easily accessible.
However, Mangudya said the regulations in place in South Africa do not allow for easy adoption of the rand.
“If we say we are going to be using the rand, we have to be part of what is called a common market area or the rand zone. For you to join the rand zone, there are two things that should happen. Right now, the common market area has four members: South Africa, Lesotho, Swaziland and Namibia,” he explained.
“Each of these economies’ currencies are backed by the rand, so for Zimbabwe to use the currency, we must have the Zimbabwean dollar, which we are not ready for because the conditions for the Zimbabwean dollar to come back are not there.”