Staff Reporter
RESERVE Bank of Zimbabwe Governor Gideon Gono has urged local banks to release part of their funds locked in Nostro accounts into the local market to improve liquidity.
Nostro accounts are bank accounts established in a foreign country for the purpose of holding that country’s currency. While the majority of locally-owned banks do not have cash in their nostro accounts, foreign-owned banks hold huge chunks of cash in their nostro accounts.
Presenting his Monetary Policy Statement on Tuesday, Gono said over US$400 million was sitting idle in offshore accounts held by some local banks at a time when the economy is going through a cash crisis.
Industries have failed to access funds locally due to volatile deposits, an absence of banker of last resort and an ine-ffective interbank market.
“A worrisome development has emerged in the banking sector, whereby some banks are maintaining huge idle balances in their Nostro accounts. This development has occurred at a time when liquidity conditions have remained tight in the domestic economy. Against the background of this regrettable development, we urge banks to release some of these balances held with foreign banks to the local market to improve the liquidity situation and support key productive sectors of the economy,” Gono said.
“The country is sitting on over US$400 million, which is in Nostro accounts out there. We are urging the banks to bring the money onshore without necessarily the central bank coming in to force them to do so.
“We would also like to implore market players to deal amongst themselves as we continue to observe that while some banks are facing liquidity challenges others are sitting on large balances on their RTGS accounts or in their Nostro accounts. We have a dichotomous situation where we have this one bank that is prepared to leave its money earning zero interest while the others are short so to speak. We are moving in to ensure that banks trade with one another without necessarily imposing that on them,” he added.
Gono also issued a warning against unnamed foreign investors for externalising foreign exchange, saying that he would engage principals in the inclusive government over the matter.
“The money market is currently inundated with challenges resulting from the worsening liquidity, delayed cash payments and illegal externalisation of cash. There are some nationalities who we are lauding as very key investors in this country but who are playing havoc to this economy. I think time has come that we will soon publish the truths so that our national leaders can be guided in terms of their investment mobilisations.”
Despite the cash challenges, the financial system witnessed a significant growth of electronic transactions with US$34 billion achieved, representing an increase of 56 percent from US$22 billion recorded in the prior year. — Staff Reporter.
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