THE year 2013 is ending on a bad note.The country's economy is in great distress. Very little has been done to mend the economy.
Only last week, the economic trauma claimed another victim in the banking sector in the form of Trust Bank, whose licence was revoked by the Reserve Bank of Zimbabwe (RBZ).
While the RBZ has been lenient on smaller banks, the going is proving to be tough for them.
The situation has been more severe for indigenous banks, some of which are struggling to dispense cash to depositors. Long winding queues are becoming a common feature at some of these banks as the liquidity crunch sinks its sharp teeth deeper into Zimbabwe's economy.
Since 2003, several banks have exited the sector after finding the kitchen too hot. Two of them have been twice unlucky.
After cancelling their licences in 2005 for various misdemeanours, the central bank had allowed Trust Bank, Royal Bank and Barbican Bank, whose assets had been bundled into ZABG Bank, to resurrect.
Barbican did not bother to try after being given a second chance. Trust Bank and Royal Bank took the chance but they both could not pull their weight.
Among some of the reasons given for their collapse has been mismanagement, abuse of depositors' funds and poor corporate governance among other malpractices. But these reasons are not under any circumstances at the core of the issues affecting these banks: They are just part of the collateral damage being caused by the collapse of the country's economy.
Most banks are currently saddled with under-performing loans extended to industry and commerce, some of which have gone bad. With prospects of recovering these loans diminishing by the day, banks are resorting to attaching property but this is not improving their liquidity in any way because the repossessed assets are being auctioned for a song.
Banks could have easily mobilised long-term deposits to cover the liquidity gap in the wake of the RBZ being constrained from playing its lender of the last resort function due to under-capitalisation. Unfortunately, the level of deposits has come down with a thud, with much of the deposits sitting in banks being transitory in nature.
The net effect of this has been failure by the banks to pay depositors, leaving them badly exposed.
Getting the country's economy to work again is the only solution out of this quagmire. A solution has got to be found to get industry back on its knees so that commerce does not continue to rely on imports, which are destroying the country's capacity to create jobs, generate exports and create sustainable revenue for the fiscus.