Professional Documents
Culture Documents
15 September 2016
The Reserve Bank Governor, Dr John Mangudya, presented the Mid Term Monetary Policy Statement on
15 September 2016 and highlighted that the Zimbabwean economy is currently characterized by:
Liquidity challenges.
Poor infrastructure
Institutional weaknesses.
Issues on land security tenure and investment regulations which are yet to be finalized.
High input costs which have been a deterrent in attracting domestic and foreign investment.
An increasing fiscal gap in the absence of external financing, which has led to a decline in private sector
activity and a reduction in domestic credit.
A combination of the current internal and external imbalances and historical challenges need to be urgently
addressed for the proper functioning of the multi-currency exchange system that is currently dominated by the
use of United States dollars. This situation requires the nation to do things differently and WALK THE TALK to
transform the economy by changing the narrative from consumption to production. The policy measures
presented are designed to augment the measures taken by the RBZ in May 2016. The new measures include:
Resuscitation of the credit guarantee scheme to enhance local production by small to medium scale
enterprises.
Putting in place Nostro stabilization facilities to deal with delays in the remittance of outgoing foreign
payments.
Encouraging the fast-track elimination of bottlenecks that are hampering the ease of doing business
within the economy especially in the export production sectors.
To achieve the optimal levels of economic turnaround it is imperative to transform the economy from a
consumptive to a productive one which requires fiscal discipline, production discipline, policy discipline, and
effective communication.
POLICY
POLICY OBJECTIVES
PROGRESS TO DATE
deployed by 30 September
2016.
up at RBZ.
quarter of 2016.
Bank.
Implementation and
of
IFRS
9:
Financial
Instruments
credit
registry
and
credit
adoption of
banking
sector
development
of
on
the
recovery
Financial Crisis.
National
Financial
Inclusion
Strategy
there
are
challenges
accessing
banking facilities
01-2016/BSD
which
outline
the
Standards
services
prime
and
products,
promote
their
risk
management
information
financial
asymmetry
services
between
consumers
and
banking institutions
Framework to be issued by 30
to
September 2016.
effective
financial
education;
improve
financial
infrastructure,
increase
individuals/businesses
order
targets
to achieve
overall financial
for
lending
financial
products
targeted
at
accompanying
and
and
women,
capacity
other
services
including
building
Already operationalised.
OTHER DEVELOPMENTS
The Export Incentive Scheme
Government, through the Reserve Bank of Zimbabwe, introduced the performance related export bonus scheme
of up to 5% in May of 2016 to be awarded to exporters of goods and services to address the challenges of low
productivity and promote exports with the overall aim of liquefying the multi-currency exchange system. The
funding mechanism of the export incentive scheme will be through bond notes in order to preserve the offshore
US$200 million counter-cyclical facility that has been arranged to support the export bonus scheme from
externalization and/or capital flight which has continued to negatively affect the economy since dollarization in
2009. The bond notes will be zero-coupon, tax-exempt debt instruments. The bond notes will start to circulate by
end October 2016 will be at par with the US$ (i.e. one to one) and will be used and treated in the same manner as
bond coins.
Balance of Payments Developments
The Zimbabwean economy is primarily a consumptive one and has greatly de-industrialised, has weak economic
fundamentals and hence it has continued to be affected by sustained mismatches between export receipts and
imports as evidenced by the disproportionate import absorption relative to exports. Over the period January to
June 2016, merchandise exports declined by 8.7%, from US$1,232.3 million realized in 2015 to US$1,125.0
million in the corresponding period in 2016. Similarly, merchandise imports for the period January to June 2016
amounted to US$2,496.6 million, a 14.4% decline from US$2,917.1 million realized over the comparative period in
2015.
2014 Actual
2015 Estimate
2016 Projection
-2,539.20
-2,247.50
-1,519.40
-1,069.20
Trade Balance
-2,947.10
-2,589.10
-2,448.10
-1,890.40
Exports F.O.B
3,861.80
3,717.20
3,614.20
3,551.70
Imports F.O.B
6,808.90
6,306.30
6,062.30
5,442.10
1,687.60
2,095.80
1,632.30
845.20
656.20
-195.40
111.50
-40.30
-138.60
-25.80
0.00
-224.00
The current account deficit is projected to narrow down, from a deficit of US$1,519 million in 2015, to a deficit of
US$1,069 million in 2016, partly on account of the projected decline in the import bill. The projected decline in
imports in 2016 is mainly a result of the various measures being implemented to compress imports as well as the
economic slowdown which has reduced the countrys import absorptive capacity. The capital and financial
account balance is also projected to decline from a surplus of US$1,632 million in 2015 to a surplus of US$845
million in 2016, as a result of the projected decline in private sector offshore loans.
Foreign Payments
For the period January to 30 June 2016, banks processed, on a cash-flow basis, total outgoing payments
amounting to US$2.7 billion. This represents a 24% decline from US$3.5 billion for the same period in 2015. All
categories of outgoing foreign payments experienced decreases due to foreign exchange constraints and the
positive effect of the import compression policies which promote the importation of critical goods and services not
available on the local market.
2016
667
650
356
580
418
2672
2015
851
777
514
656
716
3515
VARIANCE
-22%
-16%
-31%
-11%
-42%
-24%
SHARE 2016
25%
24%
13%
22%
16%
100%
SHARE 2015
24%
22%
15%
19%
20%
100%
Capitalisation
The banking sectors aggregate core capital base increased by 5.80% from US$982.50 million as at 31 December
2015 to US$1.04 billion as at 30 June 2016, on the back of improved earnings performance. The banking sector
average capital adequacy and tier 1 ratios of 24.17% and 21.51% as at 30 June 2016, respectively, were above
the minimum required capital adequacy and tier 1 ratios of 12% and 8%, respectively. As at 30 June 2016, all
banking institutions were adequately capitalized and in compliance with prescribed minimum capital requirements.
As at 30 June 2016, six (6) other institutions had core capital levels above US$50 million.
Total banking sector deposits increased by 5.2% to US$5.9 billion as at 30 June 2016, from US$5.6
billion as at 31 December 2015.
Achieved a high average prudential liquidity ratio of 52.47% as at 30 June 2016 which was above the
regulatory minimum requirement of 30%.
The banking sector has been experiencing cash challenges. The worsening trade deficit and an
inclination towards holding and externalising physical cash have continued to drain cash from the
economy, and the adverse effects are transferred to the banking sector manifesting in cash shortages at
banking institutions.
The Reserve Bank has been engaging the banking sector to reduce lending interest rates to a maximum
of 15% agreed in May 2016
Banking sector loans and advances declined from $4 billion as at 30 June 2015 to US$3.7 billion as at 30
June 2016, largely as a result of cautious and prudent lending measures by banking institutions in
response to the operating environment.
The banking sector has remained profitable, recording an aggregate net profit of US$68.0 million for the
period ended 30 June 2016, from US$34.0 million in the corresponding period in 2015. Seventeen out of
eighteen operating banking institutions recorded profits during the period ended 30 June 2016 .
There has been an improvement in the level of banking sector non-performing loans (NPLs) to 10.05% as
at 30 June 2016, from 10.82% as at 31 December 2015.
20.45%
20.00%
15.92%
13.46%
15.00%
15.91%
14.72%
10.82% 10.81%
10.00%
10.05%
7.55%
Level of NPL
Ratio
5.00%
0.00%
2011
2012
The Reserve Bank adopted a number of policy measures to ameliorate the cash challenges including
importing cash, the promotion of the usage of plastic money and the use of other currencies within the multicurrency basket and cash withdrawal limits.
Government.
unrequited
backlog
of
outstanding
foreign
gold
producers.
business operations.
facility.
Stimulate
marginalized
productive
groups
lending
hence
to
the
stimulating
systems
and
sustainable
economic
CONCLUSION
The core message embedded in this Monetary Policy Statement is that the Zimbabwean economy which is under
stress as a result of harsh external conditions, structural imbalances and legacy policy inconsistencies and
contradictions requires urgent and decisive steps to generate investment-led recovery in order to revamp
production across all the sectors of the economy. Walking the Talk, is critical because the large current account
and fiscal gaps generated by these imbalances have inhibited private investment and restricted economic growth.