HARARE – Zimbabwe needs to urgently create an independent financial sector regulatory body or privatise the Reserve Bank of Zimbabwe (RBZ), analysts say.
They argue that the current financial regulatory and supervisory model is no longer suitable for the country “as indicated by bank failures and loss of public confidence in the financial sector”.
Chris Mugaga, an economist, told Businessdaily that “there was no way the central bank could continue with the current dispensation in a market which is squeezed of liquidity.”
“The autonomy of the central bank should not only be from origin but through administration,” said Mugaga.
He added that it was high time that the RBZ looks at ways to recapitalise itself and also act as an advisor to government.
“There is no way we can continue like this. The country needs to move forward, thus we need to restore confidence in our banking sector and not circumvent challenges by implementing stringent measures in a shallow illiquid market,” said Mugaga.
The Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) added that crafting of a guiding vision for the financial services sector is long overdue.
The organisation suggested that government attends to weaknesses identified in the various pieces of legislation associated with the financial system.
“It was recommended that Zimbabwe address the weaknesses identified in various pieces of legislation (including the Deposit Protection Corporation Act, the Reserve Bank of Zimbabwe Act and the Banking Act of 2000) and urgently incorporate prudential regulations and guidelines (Basel II and III) into the Banking Act,” it said.
Zeparu recommended that Zimbabwe needs to implement either the integrated approach to regulation and supervision while working towards adopting the twin peaks model in the long-term or directly implement the twin peaks model.
Part of the central bank’s mandate is the maintenance of the internal and external value of the Zimbabwean currency.
In this regard, the Bank is responsible for the formulation and implementation of monetary policy, directed at ensuring low and stable inflation levels.
A further core function of the apex bank is to maintain a stable banking system through its supervisory and lender of last resort functions.
However, this comes as the country has been facing an acute liquidity crisis since adoption of the multi-currency system in 2009, a challenge which has been compounded by the lack of RBZ’s capacity as lender of last resort.
Apart from that, the central bank has not been able to maintain its primary goal because of the lack of a Zimbabwean currency, rendered useless by hyperinflation.