Zamco absorbs $1billion bad debts, disbanded

26 Nov, 2018 - 00:11 0 Views
Zamco absorbs $1billion bad debts, disbanded Professor Mthuli Ncube

The Chronicle

Harare Bureau
GOVERNMENT will stop further acquisitions on non-performing loans through its special purpose vehicle — the Zimbabwe Asset Management Company (ZAMCO).

The entity, which was established in 2015 with a 10-year mandate to rid the banking sector of all non-performing loans after which the special purpose vehicle was anticipated to wind down its operations, has since acquired bad debts amounting to $1 billion from distressed companies that had the potential to be rehabilitated upon injection of fresh capital.

Presenting the 2019 National Budget on Thursday, Finance and Economic Development Minister, Professor Mthuli Ncube, said the move was necessitated by the need to cut down on Government securities, which are flooding the market and posing a threat to the country`s macro-economic stability.

“Government has taken the position that there will be no further acquisitions of non-performing loans by the Zimbabwe Asset Management company.

“The PFM Act is therefore, being amended to penalise any Treasury bill issuance outside this framework. The continued issuance of Government securities has resulted in the flooding of Government securities into the market, posing risk to the macro-economic stability as a result of money supply growth,” said Minister Ncube.

He said Government’s plan was to move away from the practice of incurring extra budgetary expenditure on the back of Treasury Bills (TBs) issuances.

As such, TBs will be confined to the traditional role of mobilising resources to finance the budgeted financing gap, with such issuances triggered by a formal note from the Accountant General. Some companies that benefited from Zamco’s rescue scheme include The Cotton Company of Zimbabwe, RioZim, Star Africa, Cairns, Hwange Colliery Company of Zimbabwe, Border Timbers and CSC.

However, ZAMCO boss Cosmas Kanhai is on record saying Zimbabwe avoided a major bank lending catastrophe after over $1 billion worth of the toxic non-performing loans were shipped to the company.

He said many banks had managed to rid their balance sheets of non-performing loans and now willing to lend to productive sectors, which he said was clearly evident and reflected on their books of accounts.

Meanwhile, Government also said it is working on reviving the issuance of bonds through the development of a secondary bond market with effect from 2019 and has further plans of listing such bonds on the stock market.

“Government will move away from the private placement to the auction based system of issuing TBs and bonds in order to improve transparency, better price policy, enhance confidence and allow market determined interest rates thereby building up the yield curve.”

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