HomeBusiness DigestExtend multiple currency use –– BAZ

Extend multiple currency use –– BAZ

THE Bankers Association of Zimbabwe (BAZ) has asked government to extend the use of multiple currencies by five more years amid fears of massive externalisation ahead of next year’s general elections.

Externalisation falls under the Exchange Control Act and is applicable only to residents of Zimbabwe who are obliged to remit their foreign currency through authorised dealers.
Bank deposits have since the adoption of foreign currencies grown to US$1,86 billion from US$1,4 billion in the first half of the year.
BAZ president, John Mushayavanhu told stakeholders attending the National Budget consultative workshop at a local hotel in Harare that treasury should maintain the use of foreign currencies, a policy adopted last year to stem hyperinflation. Finance Minister Tendai Biti is expected to present the Budget Statement before Parliament next month (November).
The BAZ position could be a response to President Robert Mugabe’s weekend remarks that he was unwilling to extend the tenure of the coalition government which he said would lapse next February. Mugabe cited sharp differences with his long-time rival and partner in the inclusive government, Prime Minister Morgan Tsvangirai for holding the election.
“The currency position needs to be clarified in the budget statement so that it can be legislated in the Finance Act,” Mushayavanhu said. “The budget statement should clearly state the minimum duration of the multi currency regime. A minimum period of five years is recommended. This will stem externalisation as we head for elections next year.” Government announced that it would “revise” the policy in 2012 although it remains unclear whether Zimbabwe will restore the use of the now worthless local unit or join the South African Customs Union anchored by the rand.
The BAZ also warned that the non return of Statutory Reserve Balances is threatening the viability and liquidity of banks. A statutory reserve is the amount of money any bank has to maintain with the Reserve Bank for every customer. The bankers however advised government to issue Special Treasury Bills with “staggered maturity dates” at a nominal interest rate. The bills according to Baz should have a final maturity date by June 2011.
“In the absence of a clear payment plan by the Finance ministry, these balances will be regarded as non performing assets which should be fully provided for. This has the effect of reducing banks’ profitability (and capital) by plus or minus US$80 million, which is the total outstanding in unpaid Reserves.”
Following an increase in bank robberies after the introduction of multi currencies as legal tender, the bankers association advised government to waive duty on imported security systems for banks.
“It is therefore recommended that duty be waived for the importation of point of sale machines and ATMs to enable banks to import more gadgets. Also it is recommended that taxes on automated transactions be removed or reduced to promote use of plastic money,” Mushayavanhu said.
Meanwhile, the Zimbabwe Association of Pension Funds also backed BAZ submissions saying government should maintain the monetary regime up to 2016.
“The industry would appreciate clarification on the currency policy up to 2016 to ascertain value preservation on any future bond issues,” reads ZAPF proposals submitted to treasury.

Bernard Mpofu


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