The Sunday Mail
Kuda Bwititi and Tinashe Farawo
Finance and Economic Development Minister Patrick Chinamasa has lashed out at critics, saying there are no quick-fix solutions to the country’s economic challenges.
Speaking at the unveiling of a US$100 million Afreximbank- financed interbank facility in Harare yesterday, Cde Chinamasa noted that the country needs to get its productive sector fully operational as a matter of urgency.
“You have to produce as a country, you have to produce as an economy, you have to produce goods and services and, to produce, we need the support of the Afreximbank to support our productive sector, especially agriculture like the President has mentioned, tourism, manufacturing, mining. Only when that support is given . . . only when the productive sector is producing goods and services to sell and to export, can we resolve this challenge.
“There is no miracle, quick-fix solution to the economy as being peddled in some of the newspapers in the country.
“All of us Zimbabweans are aware of the liquidity challenges facing the country. These liquidity challenges are due to a number of reasons. Chief of those reasons is the fact that we have a precarious balance of payments. Other reasons are low export earnings, no credit lines, no foreign direct investment. These are many challenges and I would want to dare those detractors who seem to suggest that you can have a quick fix to the liquidity challenges effortlesslywithout producing,” he said.
Cde Chinamasa noted that the unveiling of the facility would go some way in alleviating some of the country’s liquidity challenges as it will help unlock idle finance in banks.
Dubbed AFTRADES (The Afreximbank Trade Debt-backed Securities), the facility will operationalise interbank trading as the large banks which have surplus will provide funds to the underperforming banks which have no liquidity to channel to the market.
The facility will be structured as “a collateral swap” whereby Afreximbank will issue securities to participating banks in exchange for collateral.
The multiplier effect of the facility is that productive sectors of the economy, which include industry, agriculture and mining, will get new capital for investment, whilst the projected increase in trade will consequently translate to economic growth.
“This is a historic occasion.
“Historic in the sense that I don’t remember the last time when we had an interbank lending in a formal way.
“This is historic in that we are trying to revive our financial system in the country, which is a prerequisite to a functional economy,” said Cde Chinamasa.
“The primary objective of the facility is to unlock deposits held by surplus banks through making them available for those banks with short-term liquidity challenges.
“By so doing, the liquidity which is lying idle will be used to stimulate the interbank market.
“This is expected to have a multiplier effect on the circulation of money in the system. Thus, the facility is intended to alleviate the liquidity challenges in order to promote the proper functioning of the economy of Zimbabwe and the stability of the financial markets,” he said.
Minister Chinamasa lauded Afreximbank for their continued support to Zimbabwe, saying the institution has so far provided trade-backed support to the tune of US$800 million.
Speaking at the same occasion, Afreximbank president Mr Jean-Loius Ekra said AFTRADES would catalyse trade in Zimbabwe and boost confidence in the country’s banking sector.
“The facility is dubbed AFTRADES to emphasise its focus on catalysing trade in Zimbabwe,” he said.
“This is because any initiative can only be successful if confidence is restored in the banking and financial sector. AFTRADES will almost certainly achieve this.
“The multiplier effects of enhanced circulation of liquidity will include improved productivity and growth of the economy,” he said.
Mr Ekra said Afreximbank would continue to support Zimbabwe’s economic recovery prospects.
Acting RBZ Governor Dr Charity Dhliwayo also lauded the facility.
“This is a historic event and we are hopeful that this facility will assist in addressing some of the liquidity challenges facing the banking sector by unlocking idle surplus funds at some banks thereby resuscitating interbank trading,” she said.
She said Afreximbank’s support to Zimbabwe dovetails with initiatives espoused in the Zimbabwe Agenda for Sustainable Socio Economic Transformation (Zim Asset).
Minister Chinamasa first announced that Government would reintroduce the facility during his budget presentation last December.
This was followed by the signing of a Memorandum of Understanding between Government, Afreximbank and the RBZ in February.