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ZIMBABWE’S banking sector, under fire from authorities to help the central bank tackle a blazing foreign currency crisis, has granted United States dollar-indexed overdrafts to exporters to ease a huge auction system backlog, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said on Friday.

Banks have been under the spotlight since George Guvamatanga, Secretary for Finance, disclosed last month that they were sitting on a combined US$1,7 billion in idle forex, as they avoided falling into the trap of non-performing loans.

The RBZ was at the time reportedly battling to allot US$200 million at the foreign currency auction system.

According to the Confederation of Zimbabwe Industries (CZI), companies were waiting for nine weeks to receive funding from the auction system.

But speaking during an exciting Monetary Policy Statement (MPS) review organised by the Zimbabwe Independent, the country’s largest circulating business weekly, Mangudya said there had been a huge shift in the past two weeks.

He said banks had been bridging the funding gap, while they waited for their clients’ foreign currency receipts to be ready.

“We are supporting the banks to support financial intermediation,” the RBZ chief said.

“We are quite happy that the banks have taken this one positively. Some of them have started granting overdrafts in foreign currency to their clients so that they don’t cause their customers to wait for foreign currency from the reserve bank. A bank will provide an overdraft today to their customer and the bank then waits for the foreign currency when the export receipts comes from the reserve bank. It means that we have improved financial intermediation, whereby the bank provides an overdraft to their client and it’s the bank that waits for the money to come from the export receipt as they are received and then we expunge that overdraft in the books of the bank. We are not forcing banks to lend. This is the role of banks,” he said.

The central bank chief reiterated Guvamatanga’s reservations that banks were sitting on “mountains of cash” when the market was barely surviving.

“We cannot sit on a mountain of money but at the same time we are saying we have a backlog of, say US$150 million. It does not make sense,” he said. “It means (there is) lack of financial intermediation in Zimbabwe. The banks have understood it and they have moved quite a lot of the backlog these past two weeks after the monetary policy,” he said.

The MPS was released on August 5.

The foreign currency auction system has raised US$1,72 billion for the productive sector since inception in June last year, ameliorating the blazing currency crisis.

The MPS said 56 auctions were conducted for both big and small companies up to last month, when the MPS was released.

Mangudya said the manufacturing sector accounted for 17 out of the top 20 auction beneficiaries during the period.

He said about US$325 million had been injected towards recapitalising companies, resulting in the sector’s capacity utilisation increasing significantly. The injection has seen up to 70% of products being consumed in Zimbabwe coming out of local firms.

“The foreign exchange auction system, which attained its first anniversary on 23 June 2021, has contributed immensely in bringing transparency in the trading of foreign currency as well as stability in the exchange rate which has culminated in price stability,” central bank chief said in the MPS.

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