The Reserve Bank of Zimbabwe (RBZ) has used its lender of last resort (LoLR) facility to bail out three banks that had run out of liquidity.
The RBZ did not name the distressed banks.
LoLR is a facility in which a central bank provides loans or liquidity to financial institutions when they are facing severe financial difficulties and cannot obtain funds from other sources.
It is one of the primary functions of a central bank.
In the 2023 mid-term monetary policy statement, RBZ governor John Mangudya said that the three banks ran out of liquidity due to a significant amount of money being taken out of the market. He said:
The month of June 2023 saw significant depreciation of the exchange rate which coincided with the second quarterly payment date (QPD) for corporate taxes.
Significant liquidity was withdrawn from the market through the QPD and most banks saw their liquidity levels dwindling, resulting in three banks approaching the bank for support through the lender of last resort facility.
The outstanding amount under the LoLR facility was $32.5 billion as of 14 July 2023.
Bankers Association of Zimbabwe (BAZ) told NewsDay recently that the sector was not having any liquidity challenges. It said:
Lending in USD is limited to what is available, considering that foreign currency is a scarce resource.
Banks can only lend what is available, taking into consideration the ability to repay in foreign currency.
Therefore, lending in forex is limited to those with the capacity to generate forex revenue.
In terms of viability, the financial sector is safe and sound, as depicted by all the financial indicators as published in the 2023 monetary policy statement.
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