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Itai Masuku
IN his monetary statement this week, Reserve Bank Governor Gideon Gono outlined a number of measures that the central bank would undertake in order to manage or contain risk in the financial sector. One couldn’t agree with him more.
As the oil of the economic engine, the financial sector must be guarded very jealously, lest our delicate Zim engine ceases. If that happens, then as those familiar with motoring will know, overhauling the engine is a mammoth task. Nevertheless, it’s certainly much easier to overhaul a real engine than it is to overhaul an economy gone bust.
This point must be underscored: Zimbabwe’s financial sector is very fragile. What with its illiquid status stemming from, among other things, debilitating national debt, high sovereign risk spawned by the political risk, subsequent reluctance of capital and credit lines and thus a battling economy? Therefore, it is commendable that there are efforts, at least on paper and in word, that the Reserve Bank is going to increase its surveillance of the banking industry, demanding stress tests results every quarter.
This should prevent the emergence of yet another Renaissance Merchant Bank-type fiasco.
However, the US$64 000 question is, who will supervise the Reserve Bank itself, given that it was the hygroscopic nucleus of the financial storm that devastated the very same financial sector since 2003? As the saying goes, who will watch the watchdog?
The financial sector has really been partly recovering from the vicious bites inflicted on it by the watchdog. Lest we be accused of dwelling on the past, we want to acknowledge that very often, in order to move forward, we must forgive and forget. Forgive, yes. Forget? Is that possible? Even if we did, the wounds and scars are there to remind us.
It is from that premise that we fear as some wounds are yet to heal, the US$83 million owed banks by the RBZ for instance, it is still difficult to trust our watchdog.
Healing involves reparation of damaged cells and in the above case and in the case of the more than US$1 billion FCA money still outstanding, reparation has not yet been completed.
Indeed, with the dynamism exhibited by our local banks and entrepreneurs in general, they could have by now made efforts to rope in more lines of credit from private banks overseas. But one is sure they have not had the conviction to do so, hence the vast majority of lines of credit available are from quasi political financial institutions.
The exhortation for international banks to bring onshore their nostro accounts most likely has its origins in the fact that these banks’ money was safer for their clients out there than in here.
As some analysts have been questioning, is the statutory reserve money not going to be dipped into at some point by the central bank, as happened in the past? And should the interbank market start operating once again, will excess funds that find their way into, say government controlled banks not be diverted to non-banking activities.
Remember the quasi-fiscal activities of the past? Elections? It appears therefore, that unless there is a serious culture change at the RBZ, the central bank itself will remain the biggest risk to the financial services sector.
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You have outdone yourself with this piece.
There must be a 'clever charlie' who can pack the conundrum that you pose..it would be grea to hear how we can keep our Reserve Bank playing by the rules they are setting for everyone else.