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Zimbabwean Central Bank, banks in crisis indaba

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The Reserve Bank of Zimbabwe (RBZ)  and  executives of local banks have been holding a series of crisis meetings in the past few days with the view to find a lasting solution to the liquidity crunch which can potentially hamper the upcoming summer cropping season, Business Times can report.

Top officials from the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development, are also part of the crucial meetings. It is understood that agriculture funding topped the agenda.

Bankers Association of Zimbabwe CEO, Fanwell Mutogo,  told Business Times that  the late financing of the agriculture sector could throw the season preparations into disarray, resulting in subdued output.

He said the crisis meetings are set to continue this week.

“Liquidity situation remains challenging but we are worried more for the farmers as this is the financing period for them.

“There are a series of meetings being held among the central bank, banks and Lands, Agriculture, Fisheries, Water and Rural Development ministry and I am sure, we will come up with a solution together,” Mutogo said.

He said there was a need to quickly come up with a solution as agriculture remains the mainstay of the economy.

If delayed,  this could have severe consequences to other industries like the manufacturing sector.

The banker said financial institutions are yet to do budgets for the summer cropping season as the liquidity crunch is restricting them to finance the sector.

“Direction is not yet clear on how much money will banks splurge for the new season given the current liquidity challenges,” Mutogo said.

He said the central bank’s tight monetary stance has choked the economy and left most businesses on the brink.

Recently BAZ president Mehluli  Mpofu said: “The 2022/2023 summer cropping season has already kicked off with irrigated crops already planted and with this liquidity squeeze in the market, the desired agriculture growth will be difficult to achieve.

As an agro-based economy, agriculture performance is key to economic growth hence if the sector doesn’t perform well, this will affect next year’s economic projections.”

The Confederation of Zimbabwe Industries president, Kurai Matsheza, also echoed the same sentiments.

“We are in a serious liquidity squeeze as we are failing to get working capital from the banks and with the agriculture funding being delayed the shortages of the raw material will persist in the long run as the farmers should have completed some preparations but they are yet to do so due to the liquidity crunch, ” Matsheza said.

Experts said the tight monetary conditions could weaken the banking sector, whose profitability has already been hit, largely due to low lending, which has been curtailed by high-interest rates, low deposits and a liquidity crunch in the market.

This, the lenders said, will also endanger stability in the banking sector.

But the government seems reluctant to move away from its tight monetary and fiscal stance.

The Treasury has also tightened its fiscal stance as it also suspended payments to contractors who supply goods and services to government departments as part of efforts to halt a slump in the local currency which was fuelling hyperinflation.

“We will keep on checking the government contracts and procurement processes by undertaking value-for-money audits. At the same time the central bank will further tighten monetary policy to curb forward pricing and speculative behaviour,” Finance and Economic Development Minister, Mthuli Ncube recently said.

During a liquidity crunch, businesses and consumers are charged high-interest rates on loans, a situation which makes it difficult for them to repay the loans.

This could also push non-performing loans up.

The central bank recently increased the interest rates to 200% from 80% to curb speculative borrowing blamed for fuelling parallel market activities

Government believes the tight monetary and fiscal policies stance will stabilise the local currency.

The measures seem to be paying off with annual inflation easing to 280.4% in September 2022, from 285% in the prior month, which was the highest since February 2021. – Business Times