Zimbabwe's battling banking sector repatriated at least US$71 million in a week to ease a liquidity crisis that straddled the country's stricken economy.
The central bank ordered the banks to repatriate at least three quarters of funds held in offshore accounts, estimated to be US266 million, by the end of this February.
Finance Minister, Tendai Biti, appearing before the Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion, on Monday allayed fears that the liquidity crisis would worsen, insisting that country's banks had enough money in their accounts.
"This shows us that you can get more out of dialogue with the market than through threats and this money is going to be used for the productive sector," Biti said.
The liquidity crunch has undermined an anaemic economic recovery underway in Zimbabwe, at a time when the uncertain political environment is deterring investors.
Recently, Biti was ordered by cabinet to deal with the liquidity crisis, and together with Reserve Bank governor, Gideon Gono they announced a raft of measures designed to contain the cash shortages, as pressure mounts on them to fix the problem.
"After consultations with the Bankers Association of Zimbabwe and government, the Reserve Bank concluded on the need for the repatriation of all other nostro account balances in excess of banks' needs, pending international payment obligations and for the purposes of taking positions in the international market," Biti said.
"With effect from March 1, banks will be required to maintain in their nostro accounts a maximum of 25 percent of their balances off-shore. The maximum rises to 30 percent from June 1. This would also be in acknowledgement of the absence of a prudent statutory liquidity ratio."
A nostro account is an account held in a foreign country by a local bank, denominated in the currency of that country. They are used to facilitate settlement of foreign trade transactions.
Early February, monetary authorities imposed cash withdrawal limits of US$10 000 with amounts exceeding the threshold requiring a 24 hour notice to the processing bank. But, according to the Reserve Bank of Zimbabwe (RBZ)'s latest circular to banks, the limits would be scrapped with effect from 1 March.
Zimbabwe has 26 banks and most of them are struggling due to chronic capitalisation and a prolonged liquidity crisis. The minister wants to trim them to "10 or six strong banks".
The repatriation of the US$71 million comes at a time when the government is crafting new laws that will compel all foreign-owned banks operating in Zimbabwe to relinquish part of their shareholding to locals, part of the broader indigenisation and economic empowerment requirements.
Youth Development, Indigenisation and Empowerment Minister Saviour Kasukuwere says the laws will "water-tight".
"As it stands, we have already established the binding instruments for some key sectors such as manufacturing and mining. We feel that it is prudent to have similar instruments for the banking sector," he said.