Zimbabwe banks must support the interbank trading

Zimbabwe banks must support the interbank trading
Published: 24 March 2019 (220 Views)
THE interbank market, revived by the Reserve Bank of Zimbabwe (RBZ) recently, has gotten off to a slow start because the majority - if not all the banks - are still in the process of putting their systems in place.

In its monetary policy statement (MPS) of February 20, 2019, the central bank allowed the RTGS dollar - an amalgamation of the bond note, bond coin and the virtual Real Time Gross Settlement - to float on the interbank market, where the forces of demand and supply shall determine the exchange rate.

The policy change signalled a bold step in the right direction for the RBZ which, despite its noble intentions, had found market developments of the past seven months too radical to ignore by maintaining the 1:1 parity between the United States dollar (USD) and the bond note.

Business, which holds the key for economic revival in Zimbabwe, has thrown its full weight behind RBZ governor Dr John Mangudya's MPS because it removes unwarranted interference by state actors in the workings of market forces, mostly for political reasons which are usually in conflict with economic rationality.

The generality of the population, except for the handful that flourish on arbitrage opportunities, also welcomed the MPS - inspite of the pain of adjustment that comes with it - because it has brought about predictability in the currency market and lowers the risk they faced in accessing foreign currency (forex) from the illegal parallel market where upon being caught, one faces up to 10 years in the country's overcrowded prisons, where conditions are deplorable.

To the RBZ's credit, the RTGS dollar has managed to trade within the range it had anticipated. Who knows, with the start of the tobacco-selling season last week, the rate may firm up - a distant possibility though.

Why is that possibility remote?

Just like with any policy - no matter how brilliant - it can only succeed if the transmitters of that policy and the market actors play their part in realising its objectives.

This has not always been the case in Zimbabwe's heavily polarised environment where the greater good is often drowned by varying political, sectional and - at times - myopic interests.

After the MPS was presented on February 20, 2019, it was given that the floating of the currency on the interbank posed an immediate threat to illegal forex dealers who used to depend on the black market to put food on their tables.

Naturally, dealers wouldn't want to see the MPS succeed because it shuts the doors for rent-seeking behaviour, abhorred for creating market distortions.

It is also quite obvious for the few who were accessing forex at 1:1 to wish for the MPS to sink in the hope that the old order could be reinforced.

The strange criticism that Mangudya got from Parliament's Public Accounts Committee led by Tendai Biti recently also exposes the disquiet in the opposition, including amongst some in the ruling Zanu-PF party, judging by the slant and character of the debate.

While the resistance from these quarters is expected, what is coming out as a surprise is the lethargy by banks to quickly put their houses in order so as to support the interbank market, which opens another window of opportunity for them to make money from forex trading and ensuring that their clients get all they need under one roof.

Understandably, the monetary authorities could not have alerted the banks to prepare their systems in advance without undermining their own policy in the event that such information was to leak into the market prior to the presentation of the MPS. The logical thing, which is what the RBZ did on February 20, 2019, was to surprise the market.

By introducing these measures, the RBZ and the Finance ministry have once again taken leadership in driving the market instead of reacting and playing catch-up. This opportunity could slowly slide away if the banks take forever to operationalise the policy.

Unfortunately, the consequences may be dire.

As the RBZ continues to fine-tune its measures by continuously looking into what could go wrong and devising supporting or mitigating measures, it must consider a set of measures to push banks into investing in the requisite software and hardware, as well as identifying and training the right staff to operate the interbank market.

The longer it takes to do meaningful trade on the interbank market, the more difficult it will be for the RBZ and the banks themselves to assert their authority in the market.

It would be sad if the banks allow those who have been thrown into disarray by the RBZ measures to re-group, fight back and put asunder such progressive policy.

Already, there are unhelpful lines of argument giving away these retrogressive intentions like: "How did the bank come up with the 2,5 rate? Why is the rate being kept at that level? Was it not better to set it above the parallel market level or at the same level?"

Really!

In conclusion, the banking industry must adopt an effective, inside-out communication strategy to support policy.

Currently, the feeling is that banks seem to engage more externally than internally or within their institutions and end up missing on critical information key to resolution of challenges.

Andrew Lampard is a retired banker who worked in Zimbabwe and South Africa. For views and comments, e-mail to andrewlampard264@gmail.com

- the standard

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

Mnangagwa asks UK to arrest Sibusiso Moyo's attackers

by Mandla Ndlovu | 16 July 2019 | 44 Views

Freedom of Information Bill

by MISA Zimbabwe | 16 July 2019 | 31 Views

Botswana: A base for future US military control of Southern Africa

by Zimbabwe Communist Party | 16 July 2019 | 41 Views

'Chiwenga bought Kasukuwere's wedding ring'

by Mandla Ndlovu | 16 July 2019 | 84 Views

White farmer thanks Mnangagwa

by Staff reporter | 16 July 2019 | 53 Views

Zimbabwe should have sent the Gems to AFCON

by Kubatana | 16 July 2019 | 48 Views

'I must be anointed new President of Zimbabwe,' says Chamisa

by Staff reporter | 16 July 2019 | 68 Views

Mutasa wanted Mugabe tried at ICC over Gukurahundi

by Mandla Ndlovu | 16 July 2019 | 78 Views

Mthwakazi National Party takes ZANU PF and MDC head on

by Mandla Ndlovu | 16 July 2019 | 66 Views

Controversial Uebert Angel meets Yoweri Museveni

by Mandla Ndlovu | 16 July 2019 | 50 Views

Civil servants stage demonstration in Harare

by Mandla Ndlovu | 16 July 2019 | 85 Views

Teachers vow to shutdown schools on 22 July

by Mandla Ndlovu | 16 July 2019 | 56 Views

Zesa to install prepaid meters on govt buildings

by Staff reporter | 16 July 2019 | 44 Views

WATCH: Chamisa speaks ndevere

by Staff reporter | 16 July 2019 | 53 Views

'A coup against Mnangagwa is about to explode'

by Blessing Ivan Vava | 16 July 2019 | 79 Views

All set for tomorrow's anti-Mnangagwa demonstration

by Mandla Ndlovu | 16 July 2019 | 69 Views

Restrain your wife - Mnangagwa told

by Methusi Ncube | 16 July 2019 | 269 Views

Mnangagwa-Army fallout deepens

by Mandla Ndlovu | 16 July 2019 | 190 Views

Auxilia Mnangagwa: A highly trained CIO spy

by Mandla Ndlovu | 16 July 2019 | 192 Views

MDC apologises to Mthwakazi

by Mbonisi Gumbo | 16 July 2019 | 126 Views

Smelly Dube scoops top UK award

by Staff reporter | 16 July 2019 | 130 Views

Attack on Mugabe coup announcer exposes polarisation

by Editorial Comment | 16 July 2019 | 182 Views

Kombi operators raise fares

by Staff reporter | 16 July 2019 | 187 Views

'Devolution a disappointment'

by Staff reporter | 16 July 2019 | 99 Views

Mnangagwa fumes over ivory, rhino horns

by Staff reporter | 16 July 2019 | 139 Views

MDC blames intimidation for by-elections loss

by Staff reporter | 16 July 2019 | 92 Views

Chamisa changes tact

by Staff reporter | 16 July 2019 | 165 Views

Zimbabwe's telecoms firms in revenue decline

by Staff reporter | 16 July 2019 | 82 Views

Paynet readmits 3 banks as alternative is tested

by Staff reporter | 16 July 2019 | 141 Views

Gukurahundi 'architect' threatens

by STaff reporter | 16 July 2019 | 97 Views

Chamisa's MDC has no more political depth than a finger bowl

by Tichaona Zindoga | 16 July 2019 | 125 Views

Zanu-PF youths take clean-up to UK

by Staff reporter | 16 July 2019 | 98 Views

Prophet in court for poisoning father to inherit his Mazda 323

by Staff reporter | 16 July 2019 | 94 Views

Chmaisa mustn't underestimate the electorate

by Staff reporter | 16 July 2019 | 102 Views

Mnangagwa hands over medical equipment

by Staff reporter | 16 July 2019 | 78 Views

Guard shoots self 3 times in suicide

by Staff reporter | 16 July 2019 | 105 Views