Forex-starved Zimbabwe has been given a lifeline after the African Export-Import Bank (Afreximbank) availed two nostro stabilisation facilities amounting to $220 million.
The facilities come at a time the economy has been facing a foreign payment gridlock due to the depletion of the nostro facilities.
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya told NewsDay last week that the proceeds derived from the two facilities of $70m and $150m each would be used to settle outstanding foreign exchange payments.
“We expect to draw down the two facilities of $70 million and $150 million from Afreximbank between this Friday (last week) and Easter. We remain most indebted to Afreximbank that has continued to support Zimbabwe during its hour of need,” he said.
“We are going to utilise proceeds from these facilities to settle outstanding foreign exchange payments, supported by funded accounts, for firms that are in the productive sectors of the economy and education foreign payments.”
Foreign payments delays have hamstrung companies’ abilities to produce after failing to access key raw materials thereby threatening production.
Last year, Delta Corporation said it was failing to remit dividends to foreign shareholders and Econet Wireless recently raised money from existing shareholders to meet foreign payments due to the gridlock in processing foreign exchange payments.
Afreximbank has been Zimbabwe’s all-weather friend, providing a bailout in her time of need.
In 2015, Afreximbank availed a $200m Trade Debt-Backed Securities, which operates and functions as a window of last resort at RBZ for local banks.
The facility was extended to 2019. It is credited for maintaining financial sector stability and inclusive growth. Total trades under this facility amounted to $641m over a two-year period from the effective date of the facility in February 2015.
Mangudya said the economy was picking up as old and new firms were resuscitating or starting operations.
He said apart from the expected good agricultural outturn, a good number of firms that are benefiting from Statutory Instrument 64 of 2016, including those in the food processing, plastic and packaging, light manufacturing, confectionaries, dairy and beverages sectors were producing above 50% of their capacity.
Mangudya said, while this was encouraging, the implication on the demand for foreign exchange was quite significant as the firms need to import feedstock.
“Therefore, demand for foreign exchange has increased, not only to satisfy transactional cash requirements, but also for import of raw materials. This in turn presents a hard choice of either importing more foreign exchange cash to meet local cash requirements or importing raw materials to increase capacity utilisation, enhance productivity and secure or create employment,” he
said.
“Whilst the opportunity cost is quite high, it is quite reasonable to support local production for the sustainability of the economy.”
Mangudya said there was need for a development of the Re-industrialisation and Export Growth Strategy (REGS) to revitalise the economy in line with Zimbabwe Agenda for Sustainable Socio-Economic Transformation and the Ten-Point reform agenda.
“REGS needs to be anchored not only on resource mobilisation but also on structural reforms that include the ease and cost of doing business, fiscal efficiency, enabling investment environment and the re-organisation of state-owned enterprises. While some of these structural reforms will cost nothing to the fiscus, their benefit is quite huge,” Mangudya said.