Friday, August 6, 2010



JULY 2010
Policy Area
Key Issues

Liquid Asset Ratio
( Liquidity ratio)

With immediate effect, minimum liquidityratio increased from 10% to 20%. This was done to minimize systemic risk.
For the market, the increase in liquidity ratio has an effect of
squeezing commercial bank lending capacity.

Statutory Reserves
In an effort to release more resources for lending, the statutory reserve ratios have
been scrapped with immediate effect.

Lending capacity of banks is not
likely to immediately improve due to other considerations including the need to comply
with increased liquidity

Bank Capitalization
As at 30 June 2010, 17 out of the 24 banking institutions were in compliance with the minimum capital requirements.
The non-compliant banks have been given up to 31 December 2010 to comply
Adequately capitalized banking
sector will help in minimizing
systemic risk.

Bank Charges ( incl Interest Rates)
Government expressed concern over the wide spread between lending and deposit rates, but would, for the time being, rely
on moral suasion.

With immediate effect, all banks must post on visible boards their explicit conditions of service including deposit rates

Lender of last resort function
RBZ has been capacitated through the fiscus to perform the lender of last resort function.
Fund described as “modest”. Operational modalities to be issued in due course.
Impact on money market
developments will depend on the size of the facility.
Enhancement ofRisk Management
Banks required developing formal frameworks for risk management that incorporate the ERM concept – integrated processes.

Risk management guideline being revised.
Real Sector Developments
• GDP is projected to grow by 5.4% in 2010 and is underpinned by growths in mining(31%), agric (18.8%) and manufacturing (4.5%).
• Mining sector growth is supported by rising minerals prices i.e. platinum and nickel prices have increased by 25% and 33% respectively, since December 2009.
GDP growth forecast remains fragile due to challenges including :
• Lack of external support
• Skills flight
 Energy constraints and
• Inadequate liquidity levels.

Inflation Developments
Annual inflation stood at 5.3% in June 2010 and this is comparable to regional average levels of around 7-8%.
The Governor warned institutions to refrain from paying wage levels which are
above productivity levels.
In the outlook inflationary pressures
will emanate from:
o High utility charges,
o Rising oil prices,
o Wage pressures,
o Psychological hangovers
from past hyperinflationary
Developments in South Africa will also have a significant impact on Zim inflation due to strong trade links.

Money Supply &
Stock Market
Money Supply &
Stock Market
Developments (continued)
• Broad money (M3) increased from US$1.4 billion in January 2010 to US$1.8 billion by 18 June 2010.
• Major sources of liquidity include
o Gold sales,
o Tobacco finance facilities,
o Off shore lines of credit and
o Workers remittances
• Loans to the private sector also increased from US$760 million in January 2010 to US$1.1 billion by 18 June 2010.
• Stock market capitalization declined from US$4.2 billion in December 2009 to US$3.19 billion by June 2010.

Monthly growth in money supply has significantly declined to 5% in 2010 from 15% in 2009. This decline clearly highlights stagnation in economic performance.
Low activity on the stock market is impacting on money supply growth.

External Sector
Cumulative to 30 June 2010, total export shipments amounted to US$871 million
compared to US$422 million over the comparable period in 2009.
Total external debt increased from US$ 5.67 billion in December 2009 to US$ 6.43
billion by June 2010. The increase was due to :
o Short term borrowings by private sector,
o Capitalization of interest on
external payment arrears.

Low donor support and the
continued deterioration of the trade balance will constrain the country’s ability to accumulate reserves and service outstanding debt obligations.
Exchange Control Issues
• In a bid to curb unwarranted
externalization of forex resources, the RBZ will seek to review the existing admin and
monitoring mechanisms for cross border transactions.
• In order to curb the illegal practice of keeping export proceeds in unapproved offshore accounts, all exporters with overdue export proceeds shall continue to be red-flagged in the CEPECS system and will remain red-flagged until they have cleared the overdue status
• The above exporters will be subject to a higher Form CD1 Accessing fee of US$ 50 as a default penalty
Companies need to ensure
compliance with exchange control requirements to avoid attention from regulators

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