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Energy Minister Jorum Gumbo speaks out as long fuel queues resurface in Zimbabwe

Hundreds of people were left stranded late Monday after a sudden shortage of fuel with public transport operators hiking fares. Reports of people walking on foot to areas like Glen Norah and Mabvuku emerged as commuter omnibus operators took their vehi…

United States issues stern warning to Mnangagwa’s government

The United States of America through its embassy in Harare has issued a stark warning to the government of Zimbabwe over the arrest and harassment of civil society leaders. The United States (US) says this […]

Lender of last resort facility on cards

Source: Lender of last resort facility on cards | The Herald 26 FEB, 2019 Dr Mangudya Tawanda Musarurwa Senior Business Reporter The Reserve Bank of Zimbabwe (RBZ) has announced plans to re-introduce a lender of last resort facility. A lender of last resort is an institution, usually a country’s central bank, which offers loans to […]

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Source: Lender of last resort facility on cards | The Herald 26 FEB, 2019

Dr Mangudya

Tawanda Musarurwa Senior Business Reporter
The Reserve Bank of Zimbabwe (RBZ) has announced plans to re-introduce a lender of last resort facility.

A lender of last resort is an institution, usually a country’s central bank, which offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse.

RBZ governor Dr John Mangudya said the lender of last resort facility will help local banks meet their monetary requirements.

“Going forward, as a bank we are going to open a lender of last resort window, an accommodation window because we know that in this market there is not too much money,” said Dr Mangudya.

“The money in Zimbabwe, just to give you statistics, the real time gross settlement (RTGS) balances are just under $1,8 billion, the rest are loans and securities. And the bulk of the RTGS balances are required for local trades, not to purchase foreign currency. So while foreign currency will be available, what may be in shortage are RTGS balances to buy the foreign currency.”

The country’s interbank market was made dysfunctional upon the introduction of the multicurrency system as confidence in the banking sector waned.

In 2010, the Government moved to restore the banker-of last-resort function of the central bank by injecting US$7 million to improve fluidity of banking operations.

And while announcing the 2015 Monetary Policy Statement Dr Mangudya announced that the local interbank market was now in operation, describing it as a “great financial milestone.”

“The interbank facility supported by the African Export-Import Bank (Afreximbank) under the Afreximbank Trade Debt Backed Securities (AFTRADES) is now operational. This is a great financial milestone,” said Dr Mangudya at the time.

“The facility would be managed by the Reserve Bank as an agent bank for Afreximbank for the purposes of managing the surplus and deficit participants’ requirements under AFTRADES.

Critically, the RBZ governor said the (interbank) “facility shall also be used as a precursor programme for the lender of last resort function by the Reserve Bank.”

Zimbabwe currently has 19 operating banking institutions.

And as at December 31, 2018, 18 of the 19 banks reported profits for the year, with a 61,06 percent increase in aggregate profits from $241,94 million in 2017 to $389,85 million, official figures show.

The lender of last resort functions both to protect individuals who have deposited funds, and to prevent panic withdrawing from banks who have temporary limited liquidity.

All things being equal commercial banks usually try not to borrow from the lender of last resort because such action indicates that the bank is experiencing financial crisis.

However, critics of the facility say it entices financial institutions to take on more risk than would be considered normal without the lender of last resort facility.

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Is Zimbabwe the Next Venezuela?

This weekend’s news that protesters were gunned down at Venezuela’s border while pro-regime thugs burned trucks filled with food and medicine demonstrated just how vicious Nicolás Maduro’s dictatorship is. But those who wonder how long he can hold on to power while his nation slowly starves might want Source: Is Zimbabwe the Next Venezuela? – […]

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This weekend’s news that protesters were gunned down at Venezuela’s border while pro-regime thugs burned trucks filled with food and medicine demonstrated just how vicious Nicolás Maduro’s dictatorship is. But those who wonder how long he can hold on to power while his nation slowly starves might want

Source: Is Zimbabwe the Next Venezuela? – Yahoo News

Robert Mugabe became the president of Zimbabwe in April 1980, back when Jimmy Carter was still president. Within two years he had deployed his infamous North Korea–trained Fifth Brigade against minority tribes in Matabeleland in a campaign of deliberate killing and starvation. The organization Genocide Watch estimated that 20,000 people were ultimately killed.

Mugabe would later launch an insane seizure of white-owned farms. That led to widespread food shortages and a destructive hyperinflation that resulted in almost-worthless 100 trillion Zimbabwean dollar notes in circulation.

But henchmen from the ruling party, Mugabe’s Zimbabwe African National Union (ZANU), violently tamped down protests, and he ruled until November 2017, when a clique of his own generals worried that his wife would replace him overthrew the 94-year-old dictator in a coup. Since then, former minister of defense and current president Emmerson Mnangagwa has proclaimed that his country is “open for business,” when in reality the regime’s slogan should be “The new boss is just like the old boss.”

Last week, even Mugabe attacked his old protégé for violently suppressing protests over a doubling of fuel prices in January. At least 17 people were killed and dozens of women were raped by marauding troops. “God has his own way of punishing rogues and cruel people,” Mugabe thundered. “People should love their army, they should not fear the army.”

Ordinary Zimbabweans have every reason to fear not only the military but every part of their government. Last week the government ended the practice of pegging the value of Zimbabwe’s dollar to that of the U.S. dollar, a 2009 reform that had finally ended the nation’s hyperinflation. Fears of a new round of hyperinflation has helped reduce food reserves such that the nation’s grain-millers’ association says there is now only a week’s worth of wheat in reserve. Zimbabwe now produces less than half of its annual wheat consumption, even while having some of the most fertile farmland and one of the most temperate climates in the world.

During my visit to Zimbabwe, every local I spoke with was wary of being quoted on the record regarding their real feelings about the government. “Everyone keeps their head down for fear it will be chopped off,” said “Captain Jack,” the nickname that one of my drivers from the airport uses in dealing with visitors. “No one has any confidence these people will ever leave power.”

When I asked an employee at my hotel if he had heard of the situation in Venezuela, he just laughed. “Oh, yes, we know about them. We would only remind them that their Hugo Chávez came to power 20 years ago. Our versions came to power nearly 40 years ago.”

While blacks I spoke with were proud that they had won independence from white rule in 1980, they were embarrassed that the country has been so mismanaged since then. “Zimbabwe has all the ingredients to be a successful state — good land, minerals, hard workers, modern farming techniques, proximity to markets in South Africa,” says Rejoice Ngwenya, head of a Zimbabwean free-market think tank. “We don’t have a government that builds on that.”

George Ayittey, an economics professor at American University in Washington, D.C., and the author of the book Defeating Dictators, isn’t optimistic that the generals behind Maduro in Venezuela or behind Mnangagwa in Zimbabwe can be displaced easily. “Bad governments metastasize into criminal enterprises so anyone chosen from the ruling elites to succeed a failed president would himself be a crook,” he told me. In Zimbabwe, for example, the anti-corruption czar, Ngonidzashe Gumbo, was himself jailed for ten years on fraud charges.

Still, Ayittey admits, there are exceptions. Street protests were able to force genuine change in South Africa in 1994, in Ghana in 2000,, and in Tunisia in 2011. “I myself was one of the architects of change in my native Ghana in 2000,” he told me. He also notes the progress that Ethiopia’s new prime minister, Abiy Ahmed, has made in reforming that nation’s rancid Marxist past.

“We should always have hope,” Ayittey told me. “But dictators have far more staying power than we like to admit. There are few happy endings.”

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Zimbabwe drip-feeds dollars to tackle cash crunch

Source: Zimbabwe drip-feeds dollars to tackle cash crunch | Reuters HARARE (Reuters) – Zimbabwe’s central bank drip-fed dollars on Monday to a handful of commercial banks to allocate to large businesses, part of currency reforms authorities hope will ease a cash crunch that has starved the economy of many basic goods. Zimbabwe ditched a discredited […]

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Source: Zimbabwe drip-feeds dollars to tackle cash crunch | Reuters

Zimbabweans queue outside a bank in Harare, Zimbabwe, February 25, 2019. REUTERS/Philimon Bulawayo

HARARE (Reuters) – Zimbabwe’s central bank drip-fed dollars on Monday to a handful of commercial banks to allocate to large businesses, part of currency reforms authorities hope will ease a cash crunch that has starved the economy of many basic goods.

Zimbabwe ditched a discredited 1:1 dollar peg for its dollar-surrogate bond notes and electronic dollars last week, merging them into a lower-value transitional currency called the RTGS dollar.

Economists welcomed the move but doubt it will prompt a swift turnaround in the southern African nation, which has grown used to currency turbulence since excessive money-printing under former leader Robert Mugabe triggered hyperinflation.

Ordinary Zimbabweans are not yet able to use the RTGS dollars in their bank accounts to buy dollars from banks, and the bond notes – which many businesses are reluctant to accept – are still in circulation.

“The devaluation was long overdue. The economy has been in limbo and the RTGS can now play a role in boosting competitiveness,” Anthony Mandiwanza, chief executive of Zimbabwean food and dairy firm Dairibord, told Reuters.

“What is critical is that the government lives within its means and narrows and eliminates the fiscal deficit.”

RTGS DOLLAR NOT WEAK ENOUGH?

The last time Zimbabwe had its own currency, a decade ago, Mugabe’s government turned on the printing presses to fund higher salaries for government workers and curry favour with the military – with disastrous economic results.

Mugabe’s successor Emmerson Mnangagwa has promised a break with the past, but many Zimbabweans are wary after his government ramped up borrowing in the lead-up to a national election last July and inflation rose to a 10-year high in January.

The central bank started selling U.S. dollars to banks at 2.5 RTGS dollars on Friday.

Mandiwanza said banks had told Dairibord the same day that it could submit requests for dollars at around 2.5 RTGS each and that it would receive an unspecified amount on Monday or Tuesday.

A dealer at a large bank in Harare whose firm operates on the interbank market said launching the RTGS at 3 to the dollar or higher would have been better to encourage U.S. dollar sellers.

“There are a lot of (dollar) buyers … but no sellers because the rate is not high enough. What we are basically doing is allocating foreign currency to corporates but no trading is taking place,” the dealer said.

‘MANAGED FLOAT’

Mnangagwa, who replaced Mugabe after an army coup in November 2017, hopes to steer the economy back to credibility and lure back foreign investors, who have also been deterred by violent security crackdowns on post-election protests last year and demonstrations last month against a steep fuel price hike.

The central bank has said it will let the RTGS dollar trade in a “managed float”.

But it has not explained how it would control the currency’s movements given it does not have significant foreign exchange reserves.

The currency dealer said the central bank was only selling dollars to banks that had lined up customers who had agreed to buy them.

“We have seen this before in the past and it went nowhere, the interbank system will ultimately become redundant if the Reserve Bank doesn’t allow the currency to freely trade,” the dealer said.

There are also indications that the central bank is not selling many dollars. Only around $5 million changed hands on Friday, a senior central bank official told The Standard newspaper in an article published at the weekend.

A Standard Chartered bank teller in Harare said her branch was not selling dollars to individuals yet, and downtown bank queues were no longer than normal.

On Monday, one U.S. dollar was being sold on the black market for four electronic dollars – those locked in individuals’ accounts for months due to the chronic cash shortages – compared to 4.2 on Friday, informal currency traders said.

“The big players are holding onto their money, that is what is holding rates at the moment,” one currency trader at Harare’s Eastgate shopping centre said.

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