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Dr John Mangudya

Oliver Kazunga Senior Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) is geared to resume its lender of last resort function by December this year with the government set to inject $100 million to capacitate the bank’s operations. The central bank suspended the lender of last resort function, a critical component in the economy, after the adoption of a multi-currency system in February 2009.

RBZ Governor Dr John Mangudya told Business Chronicle in Bulawayo on Tuesday that the process of reinstating the bank’s lending role had begun.
“We’re mobilising resources for the lender of last resort function. What we’re saying is we are looking for funds and before the end of the year we hope we would have gotten the funds to be utilised by banks in their operations so that they have a reason to extend credit to society and industry,” he said.

“The amount that is there at the moment is very small, about $10 million, which we want to augment. By December we hope to have $100 million.”
Two weeks ago in his mid-term monetary policy review, Dr Mangudya said RBZ’s present challenge was to be “pragmatic” enough to find alternative tools to stimulate the economy within the given operating environment.

He said resources being mobilised would be utilised transparently and productively to assist solvent banks to stimulate economic development.
“Such funds will not be available for use by errant banks to finance their nefarious activities,” Dr Mangudya said.

He said the country was committed to honour its $10 billion debt to international financiers.
The RBZ boss said the amount was a small figure given the country’s vast mineral resources and called for improved production to turn around the economy.

“That’s not a big amount for Zimbabwe if we work at full throttle. We only need to work hard using our resources to clear the debt. It’s important to have a culture of paying back,” said Dr Mangudya.

Finance and Economic Development Minister Patrick Chinamasa has said the restoration of confidence in RBZ was at the core of building overall confidence in the country’s financial sector.

The government assumed RBZ’s debt of $1,35 billion and committed itself to raising between $150 million and $200 million to capitalise the central bank.

“The second stage is to raise an amount of $150 million-$200 million to capitalise the Reserve Bank in order for it to provide liquidity support to the financial sector as we proceed to ensure that it effectively plays the lender of last resort role and re-discount market instruments when the need arises,” said Chinamasa.