Bank says political crisis should be resolved first

Zimbabwe’s economy can only be turned around when the present political crisis has been resolved. One of the country’s leading financial institutions, Kingdom Financial Holdings says while Zimbabwe continues to face serious social, political and economic challenges that need urgent redress, “what has emerged from all these challenges is that any remedy is dependent on a resolution of the political environment”.

The banking group says though the government was optimistic about curbing inflation when it presented its 2003 budget last year, forecasting annual inflation at 96.1 percent, inflation had soared to 364.5 percent by the end of June. It was now predicted to reach 800 percent by the end of the year.

National savings had dropped from 20.8 percent in 1995 to 9 percent in 2000. They are currently estimated 8 percent. High savings are a prerequisite for investment and sustained growth. The government had targeted a national savings ratio of 25 percent.

Foreign currency had dried up with one of the main contributors being the fall in tobacco production now at less than 100 million kgs. The Export Incentive Scheme introduced in February had failed to take off because the government had not reviewed the exchange rate on a quarterly basis as promised.

The budget deficit initially projected at$230.2 billion, or 11.5 percent of Gross Domestic Product, is now predicted to reach $400 billion which will be 15.5 percent of GDP.

Despite the gloomy picture, the financial institution posted positive results which saw attributable profit increase by 564 percent. Net interest income increased from $1.2 billion to $7.2 billion while dealing profits soared from $415 million to $8.6 billion.

Other income rose from $1.4 billion to $3.9 billion with total income shooting up from $3 billion to $19.8 billion.

Operating profit rose from $1.4 billion to $12.8 billion with net profit at $8.4 billion, up from $912.9 million.

The banking group says it is reviewing its regional operations to ensure that it holds controlling interest in each stake where it does not have management control.

It says First Discount House improved its market share by 30 percent while trading volumes at Investrust Bank have increased.

Kingdom Botswana had been renamed Kingdom Bank Africa. It will carry out all aspects of investment banking and distribution of American Express credit cards throughout Southern Africa excluding South Africa.

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