An aggressive cleanup by the Reserve Bank of Zimbabwe (RBZ) sucked $9 billion from the market, First Capital Bank (FCB) said on Friday, as its third-quarter financial statements showed revenue soaring 82 %.
Sweeping operations are deployed to control liquidity and control inflation.
The RBZ strategy has been credited with lowering inflation and stabilizing a currency that saw 70% of its value wiped out during the reporting period.
However, concern is growing over the RBZ regime which, along with a high policy rate, is precipitating output cuts and choking off projected growth rates.
In a third quarter trading update, FCB predicted that the RBZ would maintain its grip.
As part of the clean-up operation, the central bank minted about US$3 billion worth of gold coins to lure foreign exchange seekers to official markets, giving it better control over monetary policy.
Government authorities canceled payments to suppliers after accusing them of inflating prices and engaging in black market activities.
Annual inflation fell to 269% in October from around 280% previously, giving a semblance of exchange rate stability as it has been since August.
In its report, FCB said $9 billion was drained from the market.
“The RRZ maintained a strict liquidity management framework, introducing gold coins in the quarter under review which would have mopped up over $9 billion by the end of September 2022,” the acting secretary said. of the company, Sarudzai Binha, as she shared the results with investors.
“This measure was associated with the introduction of minimum lending rates of 200% and 100% for businesses and individuals, respectively, a measure that has curbed the expansion of credit and, consequently, the growth of the mass monetary. These and other measures allowed the parallel market exchange rate to show some level of stability, with the margin against the official rate shrinking significantly at the end of the period,â Binha said.
âThe bank expects the aggressive liquidity management policies and high interest rate monetary framework to remain as a means to counter inflationary pressures. This may pose a downside risk to credit performance as borrowers’ ability to bear the associated costs is strained.
“The bank will therefore remain cautious in its approach to asset creation, ensuring that a sufficient liquidity buffer is maintained to avoid outages while the capacity of borrowers is assessed rigorously, taking advantage of the apparent resurgence in the key sectors of the economy,” Binha said. .
FCB’s September 2022 total inflation-adjusted revenue increased to $26 billion, about three times higher than $9.6 billion in the second quarter and 82% higher than $14.3 billion during of the comparable period in 2021.
âThis performance is underpinned by a strong interest income performance which was driven by the growth of the foreign currency loan portfolio and the revaluation of the Zimbabwe dollar portfolio in line with the prevailing interest rate policy framework. Foreign currency-denominated revenue, at 40% of total revenue for the quarter, shows an increase of around 22% in the first quarter,â Binha said.
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