Harare, – The Global Credit Rating Company (GCR) has placed the national scale ratings of Zimbabwean financial institutions on Negative Rating Watch citing potentially adverse impact from the recently announced Fiscal and Monetary Policies as well as the Transitional Stabilisation Programme. GCR cited among other things the negatively received 2% Intermediated Transfer Tax, separation of bank balance sheets into local RTGS foreign currency accounts (FCA) and NOSTRO FCAs in a bid to protect foreign currency earners from the severe foreign currency shortages in the country. The above developments were negatively received by the market and sparked a huge discount trade in the parallel markets between the RTGS and USD, hoarding of basic commodities, flight to shelter on the stock exchange or in fixed assets, and some retailers refusing to accept local RTGS for transactions opting rather for forex or temporarily shutting down.
GCR said that despite the above developments, the Zimbabwean government continue to insist on the parity of the local RTGS to the USD or the NOSTRO FCA balance, notwithstanding the fact that one cannot transfer from the local RTGS to the NOSTRO FCA.
The government accepts this parity for all government and quasi-government related transactions, which has created a deep triangular arbitrage to the private sector and parallel currency market. GCR also said it was unable to confirm the nature or existence of the USD500m facility agreement between the government and Afreximbank, meant to backstop the parity of the USD and RTGS.
GCR noted that the following possible broad negative impacts may result in renewed inflationary concerns, which if continued, could deteriorate household affordability and could have a material impact on the quality and earnings of bank balance sheets.
Furthermore, fees and commissions maybe lower, resulting from the economic deterioration and the change in the tax regime, which makes transactions costlier.
Foreign currency shortages may worsen, not improve, having a negative impact on this import-reliant economy. As a result, GCR anticipates a sector wide deterioration in asset quality given the operational and viability complications that Zimbabwean corporates are exposed to. Furthermore, the ability of the industry to service existing foreign currency lines of credit may have reduced.