Politics

Beyond ZiG, an introspect into MPS!

Zimbabwe foreign currency receipts — Although the new currency forms part and parcel of the monetary policy, it is also important that there are other aspects of the monetary policy beyond just the currency and this article will dwell on those.

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IN the midst of the noise and rumblings around the new structured currency, where there is no shortage of opinion on what should or should have been done, it is very easy to forget about the actual Monetary Policy Statement (MPS).

By Rufaro Hozheri

Perhaps the idea to announce the new currency at the same time as the MPS was a strategic move by the authorities, but if we are not careful we can miss a chance to analyse a very important policy document whilst focusing on the structured currency.

Although the new currency forms part and parcel of the monetary policy, it is also important that there are other aspects of the monetary policy beyond just the currency and this article will dwell on those.

An MPS in simpletons language is a medical report of the state of the financial sector of the economy. It gives an overview of the financial flows in and out of the country over the year and an overview of the status of the banking sector paying attention to certain evaluation metrics. Terms like exchange rate, inflation, balance of payment, broad money supply and statutory reserves amongst others are used very often in the MPS.

The Central Bank usually have a choice to make their monetary policy either restrictive or accommodative. The former is also sometimes called a hawkish policy as it seeks to increase interest rates and statutory reserve requirements to tame inflation in the country.

The latter is often referred to as dovish policy and is the direct opposite of the hawkish policy that the RBZ has been pursuing for some time now.

In this hawkish policy, the policy rate for the greater part of last year was between 130% – 150% per annum for the local currency and this is the minimum rate that banks can lend at.

However, an accommodation facility for the productive sector at 75% per annum was availed. Given the new local currency, the policy rate is now at 20% which is still very restrictive.

In addition, Open Market Operations, which are activities by the Central Bank to control money supply were applied including instruments like gold coins to tame inflation. Statutory reserves were also reviewed upwards to 15% for demand and call deposits, meaning for every dollar you have in your bank account that you use for everyday transactions, fifteen cents of that can’t be lent out by the banks.

Non-Negotiable Certificate of Deposit (NNCD) were also utilised by the Apex bank to mop up excess liquidity in the market in their attempt to tame inflation.

The foreign currency auction system had become an integral part of the monetary system in Zimbabwe since mid-2020. Essentially over that time US$4 billion was channelled via the auction to importers and was financed by the exporters. This auction had become a bone of contention due to its operationalisation, with other economic agents blaming it for selling cheap foreign currency and it has now reached the end of its life. The auction was closed with a backlog which will be converted into the new currency.

The other important component of the MPS are the foreign currency flows of the country. In this section the Central Bank breaks down all the inflows i.e. exports, international remittances, Foreign Direct Investments, private loans, and income receipts. This will be against the foreign payments that are made by the country mainly via imports.

In 2023 the country faced a four per cent drop in receipts but are still way above the imports and foreign currency earning capacity of many regional peers.

The financial sector has also witnessed a steady increase in the diaspora remittances over the years and has now become a critical component of our foreign currency inflows.

These free funds saw a 17% jump in 2023 and is expected to continue on its streak. Exports took a 17% knock, albeit being the largest contributor to these inflows. The knock in exports were mainly due to the softening of commodity prices, which are the bulk of exports. According to the MPS 2024 started on a good note with first two months exports recording a 23% improvement.

The MPS also looks at the health of the banking sector in the economy. This looks at various metrics to assess the fitness of the sector such as loan to deposit ratios, cost to income ratio etc.

Of interest is the non-performing loans ratio which is beginning to spike given that the majority of loans and advances are in hard currency. However, at the moment they are still below the 5% benchmark.

The asset mix of the banking sector is also worth an analysis with loans and advances contributing just under 30%, a 2-percentage point decline from the 2022 numbers whilst balances with the central bank increased to 15% in line with the statutory reserves.

Securities & Investments together with fixed assets were over a quarter of the assets in both years as some of the banks looked at hardening their balance sheets.

The majority of loans and advances remain toward the productive sector despite a 6 percentage point knock off, whilst the consumptive ones were just up 20%. The allocation of loans to the agriculture sector shrunk from 23% in 2022 to under 15% in 2023 as the El Nino induced drought was anticipated. The mining and manufacturing sectors witnessed a marginal increase in the loans advanced to it by the banks together with the distribution sector.

In terms of the banking sector income mix, fees and commission were 20% of the income mix down from 29% in 2022.

On the other non-interest income, revaluation gains frominvestment properties and foreign currency assets was 48% of total income, a level that was maintained from 2022.

In rounding up it appears that the financial sector has managed to survive despite the monetary challenges from a macroeconomic perspective, and this has been justified by various strategies undertaken such as hardening the balance sheet.

However, there are sectors such as the mortgage sector which need the assistance of the banking sector more than what it is currently doing at the moment and the new currency will be essential in ensuring that this is achieved.

Hozheri is an investment analyst with an interest in sharing opinions on capital markets performance, the economy and international trade, among other areas. He holds a B. Com in Finance and is progressing well with the CFA programme. — 0784 707 653 and Rufaro Hozheri is his username for all social media platforms. This article was first published here by the News Day.

Politics

ZiG currency goes physical, but not everywhere

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THE notes and coins for Zimbabwe’s sixth currency since independence in 1980, Zimbabwe Gold (ZiG), hit the streets this week as the government makes yet another attempt to tame inflation.

The money has coins worth 1, 2, and 5 ZiG, and notes for denominations between ZiG10 and ZiG200.

President Emmerson Mnangagwa pleased with the public’s reception of the ZiG so far.

“I commend all Zimbabweans for the manner in which we have adopted and are protecting the use of our currency,” he said.

The ZiG, according to the government, is backed by 2.5 tonnes of gold and other minerals, such as diamonds, thus making it a “structured currency”.

Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu told the media that the ZiG was a result of wide consultations that involved experts from the World Bank.

The governor vowed that, unlike his predecessors, the business of “wantonly” printing money wouldn’t be tolerated under him.

Pay more if you pay in ZiG

The money is already available in banks countrywide with individual withdrawal limits pegged at ZiG3 000 (about R5 460) weekly for individuals.

For corporates, the weekly withdrawal is ZiG30 000 (R54 560) while schools, hospitals, clinics and local authorities can get ZiG250 000 (R455 000) monthly, and government departments can withdraw ZiG300 000 (R545 600) monthly.

For vendors, in the second-largest city of Bulawayo, there’s optimism that the currency could at least for some time be a solution.

Sandra Moyo said:

I don’t mind selling my vegetables in the ZiG, provided I won’t have issues when restocking. But for those who import goods the stability of the ZiG will make it work provided they find an official source to buy forex to restock in say, South Africa and Botswana.
The official rand to ZiG rate in Zimbabwe places the latter in a stronger position.

However, on the black market, the ZiG has already lost value barely a month since its digital introduction.

“We do simply sell our things more expensive in the ZiG so that we have room to buy the costly forex on the streets. In some cases, this discourages people from buying using the ZiG when they have forex, which is more competitive,” Moyo said.

“Therefore, as long as the ZiG does not earn the bad money tag, we are ready to trade.”

Public transport operators on local routes are yet to accept the ZiG.

“Our challenge is that we buy fuel in forex. We are comfortable charging in rands and American dollars. We don’t have a ZiG fare for now,” said Taruvinga Zhou, a transport operator.

Air Zimbabwe and Fast Jet are the only airlines accepting ZiG payments.

In 2022, Zimbabwe owed South African Airways (SAA), Emirates and other international airlines a total of $177.6 million in funds that could not be repatriated due to currency shortages.

Economists say those airlines might stick to foreign currency charges instead of ZiG.

Legacy of currency crisis

Currency woes are an all-familiar story in Zimbabwe.

At the turn of the millennium, the economy started deteriorating.

This was against the backdrop of farm invasions, government corruption, and violation of democracy and human rights resulting in international isolation of the Robert Mugabe regime through sanctions by the European Union (EU), the United States (US) and withdrawal from the Commonwealth.

Similar to past episodes when introducing a new currency, the regime in Harare slashed zeros which accumulated due to inflation that had eroded almost 80% of a currency commonly referred to as the Real Time Gross Settlement (RTGS), but denominated as the Zimbabwe dollar.

On 5 April, the RBZ announced that it was introducing the ZiG, when physical notes of the RTGS were already rejected by the public.

The highest denomination (Z$100) was not enough to buy a loaf of bread which cost, at the time, Z$30 000.

This meant that bread could be bought in rand, US dollars, or using the RTGS in electronic form.

Source: News24

Politics

Champions League is being expanded and EPL teams have failed to take advantage

Manchester United manager Erik ten Hag looks on during their Premier League game against Liverpool at Anfield. Photo: Carl Recine/Reuters

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MANCHESTER, England — The English Premier League has missed out on a bonus fifth Champions League place in next season’s revamped and expanded competition.

Borussia Dortmund’s 1-0 win against Paris Saint-Germain in their semifinal first leg on Wednesday confirmed Germany would join Italy in being granted an extra berth.

The fifth spots were based on performances from each country this season in the Champions League, Europa League and Europa Conference League and averaged out by UEFA.

Aston Villa was England’s only remaining team in Europe by advancing to the semifinals of the Conference League. But even if it goes on to win the competition, Villa cannot amass enough points for England to overtake Germany, which still has two teams in the Champions League and one in the Europa League.

Dortmund’s win took Germany’s average points total to 18.357. The most England could amass is 18.25.

It means three-time European Cup winner Manchester United will miss out on next season’s Champions League, likely increasing the pressure on manager Erik ten Hag.

Aston Villa and Tottenham — competing for fourth place in the Premier League — also know there will be no back door entry to the biggest stage in Europe.

UEFA’s ranking system gives points for each game a team wins or draws in European competition, with bonuses attached to advancing to different stages.

Since 2005, England would have qualified for a fifth place in the Champions League in 14 of 19 seasons. And despite having finalists in five of the past six editions, English teams’ disappointing performances this season have wrecked their chances of an extra place.

Man United and Newcastle failed to advance from the group stage, and Manchester City’s quarterfinal loss to Real Madrid was the defending champion’s earliest exit from the competition in four years.

In the Europa League, Liverpool was surprisingly eliminated by Atalanta in the quarterfinals.

In contrast, German teams have excelled. Bayern Munich and Dortmund were through to the semifinals of the Champions League and Bayer Leverkusen into the semifinals of the Europa League.

Dortmund, fifth in the Bundesliga, guaranteed a place in next season’s Champions League by beating PSG.

Roma is currently fifth in Italy.

The Champions League is expanding from 32 to 36 teams next season to allow for a new league phase that will replace the existing group stage.

Via a seeding system, teams will be drawn to play against eight opponents home and away in one league format.

The top eight teams will advance to the round of 16. Teams that finish from ninth to 24th will face a two-leg playoff in order to advance.

Source: AP

Politics

Real Madrid can clinch Spanish league title as it seeks another Champions League crown

Real Madrid withstood an onslaught from RB Leipzig

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BARCELONA, Spain — Chasing another Champions League crown, Real Madrid already has its fingertips on the Spanish league title.

The 14-time European Cup winner could clinch the Spanish league on Saturday when Madrid hosts Cadiz and Barcelona visits Girona if everything goes its way.

Madrid can lock up title No. 36 with four games left in two scenarios: If Madrid beats Cadiz and Barcelona fails to beat Girona, or if Madrid draws with Cadiz and Barcelona loses at Girona.

Madrid leads Barcelona by 11 points and has the tiebreaker with Barcelona in its favor entering the round. Madrid has been the runaway favorite since it beat Girona, then its top challenger, in February and quashed a half-hearted rally by Barcelona in a clasico victory last month.

With the domestic title apparently a question of time, Madrid’s priority is its Champions League semifinal with Bayern Munich. Madrid earned a 2-2 draw in Germany thanks to Vinícius Júnior’s brace on Tuesday. Bayern comes to Madrid next Wednesday to decide who will face Paris Saint-Germain or Borussia Dortmund in the June 1 final.

Led by Jude Bellingham, Vinícius and veteran midfielder Toni Kroos, Carlo Ancelotti’s side has lost only once in 33 league games in this campaign.

Ancelotti rotated his starting lineup for the last round where Madrid won at Real Sociedad, so it is likely that he will also rest some key players against a Cadiz side that is in danger of relegation. The team from southern Spain is in 18th place, inside the drop zone, and five points behind Celta Vigo, the last team clinging to safety.

FOR SECOND

Xavi Hernández has acknowledged this season will finish without a title, even if he changed his mind and decided to stick around as Barcelona coach.

Barcelona is fighting Girona for the runner-up honors. The Catalan derby will decide who will be in pole position to finish second and earn a spot in the lucrative Spanish Super Cup.

Barcelona leads third-placed Girona by two points. Girona, the sensation of the league, beat Barcelona on the road 4-2 in December.

Girona’s Artem Dovbyk is leading the chase to be the league top scorer. The Ukraine striker has 19 goals, two more than Bellingham.

LAST CHAMPIONS LEAGUE SPOT

Atletico Madrid is at Mallorca as it tries to tie up fourth place and the final Champions League spot. Fifth-placed Athletic Bilbao trails Atletico by six points before playing at Getafe on Friday.

Source: AP