Zimbabwe central bank cautions on foreign bank ownership

HARARE, Jan 31 (Reuters) - Zimbabwe's central bank chief onThursday cautioned the government against a drive forcingforeign banks to hand over majority stakes to locals, sayingthis could damage confidence in the sector battling through afragile economic recovery.

Gideon Gono also said the current dollar crunch and highinterest rates, which averaged 22 percent in 2012, were a resultof political risk and urged leaders to tone down rhetoric thatcould scare away foreign investment.

Zimbabwe was on a "path to destruction" with a huge importbill of $7.5 billion last year against exports of $3.9 billion,Gono added.

"The financial sector is a different animal altogether, aone-size-fits-all approach does not work for the sector," Gonosaid in a monetary policy presentation.

He added there was a need to "restore confidence, trust andstability in the sector."

Foreign firms, already cautious about doing business in theresource-rich but destitute state, were increasingly skittishabout entrenched President Robert Mugabe's calls forcing them toturn over majority stakes to locals.

Mining firms have faced the most pressure but banks haveincreasingly become targets.

Standard Chartered Bank Plc, Barclays Bank Plc, South Africa's Standard Bank and Nebank all have operations in Zimbabwe.

The southern African country is set to hold a referendum ona new constitution by April and general elections later thisyear. It has approached foreign donors to help finance anelection it says it cannot afford.

The country's economy has stabilised since the formation in2009 of a unity government between Mugabe and rival, PrimeMinister Morgan Tsvangirai, but growth is slowing as the countrystruggles to attract badly needed foreign cash.