Maravi

(NEWZIMBABWE) Banks targeted as dollar crunch bites

Banks targeted as dollar crunch bites
16/02/2012 00:00:00
by Nelson Banya I Reuters

ZIMBABWE will limit the amount of cash local banks can hold in offshore accounts, Finance Minister Tendai Biti said on Thursday, in its latest move to ease a dollar crunch in the wake of the collapse of its own currency. The country has been battling a dollar shortage since the start of 2012 due to a lack of dollar inflows on foreign investor concerns over government policies.

[Source? Worldwide banks are reluctant to lend to eachother. But in Zimbabwe, it is because of indigenisation? Prove it. - MrK]

The country gave up using the Zimbabwe dollar in February 2009 after it was destroyed by hyperinflation that peaked at 500 billion percent. It switched to using foreign currencies instead, mostly the U.S. dollar.

Biti said on Thursday that banks will have to repatriate from March the bulk of funds they hold in so-called Nostro Accounts, or offshore accounts used for international payments and forex trades.

"With effect from March 1, 2012, banks will, therefore, be required to maintain in their Nostro Accounts a maximum of 25 percent of their balances off-shore," Biti said in a statement, adding that the ratio of offshore balances would be raised to 30 percent from June 1.

Last month the central bank set limits on cash withdrawals and urged banks to inject some of their foreign cash holdings into the economy to help avert a dollar crunch. It also warned them that the government could compel them to do so if they did not comply.

The central bank says local lenders, mostly those with international holding companies, have about $450 million in offshore accounts. Barclays Bank Plc, Standard Chartered Plc and the Standard Bank groups are some of the major international firms operating in Zimbabwe.

Last month, Biti said Zimbabwe would draw down $110 million from its allocation of a 2009 $500 million IMF emergency fund in a bid to ease the foreign exchange shortage and bolster the country's $4 billion 2012 budget.
Biti also said the government would soon launch a $50 million bond to raise funds for infrastructure projects.

Since 2009, Zimbabwe has toyed with the idea of issuing bonds to raise funds for projects it cannot fund through its meagre budget, but it has not followed through. Analysts say such plans would have limited success mainly due to the country's risk profile.

Labels: BANKING, MDC, NEOLIBERALISM, TENDAI BITI

posted by MrK @ 4:57 PM