Zimbabwe Interbank market that was abandoned in 2009 when Zimbabwe dollarised to resume


THE interbank market will resume mid next month after a 15-year hiatus with most banks having signed the relevant documentation in this regard.

Reserve Bank of Zimbabwe governor Dr John Mangudya

Reserve Bank of Zimbabwe governor Dr John Mangudya said yesterday that two banks were still to sign up, but they were expected to have done so at the end of this month.Dr Mangudya made the remarks in an interview with journalists on the sidelines of a one day economic outlook symposium held at a local hotel in Harare yesterday.During the deliberations he said despite the myriad of challenges facing the country, including choking liquidity, Zimbabwe was a sleeping giant about to awaken.The expected resumption of the interbank market, abandoned when Zimbabwe dollarised in 2009, is backed by a $100 million facility extended by the Afreximbank.“Each bank was supposed to sign some agreements to participate, there are many banks so they needed to talk to their lawyers for legal opinion,” he said.Zimbabwe currently has limited monetary policy tools to intervene in liquidity issues as it uses foreign currencies after scrapping the local unit due to hyperinflation.

Dr Mangudya said when the interbank market resumes; it would operate more like a members club, hence the need for each participant to be properly signed up.Banks will use Afreximbank trade backed securities as collateral to obtain funding from fellow institutions with surpluses to cover their own short positions.It is expected that the resumption of the interbank market will resolve the issue of short positions among banks when others have more than they require.Banks have been unwilling to cover each other due liquidity risks in the sector, which would leave lending banks exposed if a borrower ran into problems.It was discovered that certain well funded banks could have as much as $200 million surplus at a given time when other banks struggled to meet obligations.However, the liquidity risks have been confirmed by challenges that have led to the liquidation of Capital Bank, Interfin Bank and surrender of licences by Genesis Investment Bank, Allied Bank and suspension of deposit taking at Tetrad Bank, which is still battling to tie up a deal meant to inject fresh funding.Dr Mangudya, however, said the collapse of banks as result of the liquidity challenges hounding the economy was only natural as this happened even in economic giants such as the US.He said this cleared out weak institutions.The tight liquidity challenges facing banks comes when the RBZ is also hamstrung by lack of funding to be able to discharge its lender of last resort function.