eBusiness Weekly
Tawanda Musarurwa
HARARE – The Government has negotiated several foreign currency facilities that are set to improve the foreign currency shortages in the country, as well as curb parallel forex market activities, President Emmerson Mnangagwa said today in his inaugural State of The Nation Address (SONA).
Prevailing shortage of foreign currency has been making it difficult for local industry to import raw materials for use in their production processes, hampering the growth of manufacturing in the country.
But drawdown of some the US$500 foreign currency facilities, which will commence next week, are expected to improve the situation significantly.
“In order to bring sanity in the foreign currency market, my Government through the Reserve Bank of Zimbabwe (RBZ) has negotiated a number of foreign exchange facilities amounting to US$500 million that are intended to meet the growing demand for foreign currency by business and the public in general,” said President Mnangagwa.
“Some of these facilities shall be disbursed this week to meet the expanding demand for foreign currency that continues to be sustained by fiscal imbalances, which my Government has made a great commitment to address.”
On Monday, London-based emerging market fund Gemcorp Group said it had extended a US$250 million loan to Zimbabwe to help the country with essential imports.
According to the RBZ, Zimbabwe’s backlog for foreign payments is in excess of US$600 million.
Meanwhile, President Mnangagwa added that the use of the multicurrency system will continue until such a time that Zimbabwe’s macroeconomic fundamentals have re-aligned.
“My Government shall, however, continue with the use of the multicurrency system up until the current negative economic fundamentals have been addressed, to give credence to the introduction of the local currency.
“The economic fundamentals that need to be met are a sustainable fiscal, foreign currency reserves of between three to six months of import cover and sustainable consumer and business confidence.
“These economic fundamentals are yet to be made to justify the introduction of our own currency,” he said.
Zimbabwe currently uses a basket of currencies dominated by the United States dollar, as well as financial instruments – the bond notes, which are guaranteed by an international financial organisation.
Although the Reserve Bank of Zimbabwe (RBZ) has pegged and maintained the US dollar-bond note official rate at 1:1, cash shortages have resulted in a thriving black market for physical currency, both bond notes and United States dollar notes.
At broader economic level, the President said the Government is taking a multifaceted approach to dealing with issues bedeviling the local economy.
“My Government will accelerate on-going efforts towards stabilizing the macroeconomic environment, creation of fiscal space currency reforms and enhancing foreign currency availability improving liquidity, increasing the country’s attractiveness, reducing the budget deficit and ensuring gradual growth of all sectors of our economy,” said President Mnangagwa.
