eBusiness Weekly
Martin Kadzere
Zimbabwe is pinning hopes on Chinese banks to extending significant lines of credit to ease a serious shortage of foreign currency following a sharp rise in demand by businesses resulting from improved economic activity, a senior central bank official said.
Reserve Bank of Zimbabwe governor John Mangudya, said this week Zimbabwe had put in place measures to ensure procurement of adequate essential imports, adding there was no need to panic over possible shortages of key commodities. Even though the country was facing growing demand of foreign currency, the RBZ chief assured the nation that “plans and contingency plans” have been put in place to optimally meet the country’s needs.
The southern African nation saw its foreign currency requirements increasing by nearly 50 percent since the beginning of the year, largely due to improved economic performance, but with no corresponding generation of the hard currency.
This is, however, expected in the short term. In the long term—when productive capacities are fully utilised — the country is expected to export more and the trend will be reversed.
This comes at a time when fears are heightening this week the country could soon be hit by a wave of shortages of critical raw materials for the production of key commodities.
Speculation was rife this week that serious shortages were looming following reports on cement shortages and that some companies were scaling down due to shortage of raw materials. It later emerged that the cement shortages was largely due to maintenance at one of the major factories. It had also been speculated that bread shortages were looming after the central bank failed to avail foreign currency for wheat imports. But officials confirmed yesterday the situation was under control.
No need to panic
Pouring cold water on the growing speculation that Zimbabwe was likely to plunge into crisis due to a wave of shortages of basic commodities, Mangudya, who was in China attending the Forum on China-Africa Co-operation this week, told Business Weekly that he was confident that the discussions he held with some Chinese banks on the side lines of the FOCAC summit, would yield positive results.
This was in addition to other measures that the bank was putting in place to stabilise nostros.
“There is no need to panic,” Mangudya said. “We have held discussions with some banks here for some lines of credit and such discussions are going to yield positive results.”
“Apart from that, there are also some measures that the central banks is putting in place to ensure adequate procurement of essential products that include wheat, fuel, soya crude so that there is steady supply of these products,” he added.
Mangudya said Zimbabwe’s import dependent ratio was 45 percent to 50 percent.
“Now that the economy is expanding at a faster pace, coupled with increase of international prices of some commodities, we need more foreign currency for imports.”
Last week, Mangudya said the central bank negotiated a $500 million funding package with Afreximbank as part of efforts to resolve the foreign currency shortages. Afreximbank has been Zimbabwe’s biggest benefactor since dollarisation, at a time when most global lenders had stopped extending fresh lines of credit to the country.
Patrick Chinamasa, Finance and Economic Planning Minister who also attended the FOCAC summit, said Zimbabwe was looking for lines of credit amounting to $2,5 billion to revive the economy.
“We are looking for lines of credit, and we have been having those discussions on the sidelines of the 2018 FOCAC, but there is nothing that we can tell until they have come to fruition. We are looking at $2,5 billion lines of credit to support the entirety of the productive sectors, tourism, mining, industry, agriculture and manufacturing among others,” he said.
Situation under control
Industrialists who spoke to Business Weekly, said while the central bank
was “doing all it can” to provide foreign currency for key imports, it has of late been overwhelmed by the growing demand triggered by improved economic activity.
“There is no need for people to panic,” Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said.
“What people need to know is that domestic consumption of local goods has grown while at the same time we are having foreign currency shortages.
“But the situation is very under control and we would like to assure consumers not to panic.”
Jabangwe said the industry lobby group was working on a committee that would continuously work with the central bank to ensure efficient utilisation of foreign currency.
This would help in making sure importer’s needs are adequately met during in the last quarter of the year usually characterised by huge demand of foreign currency.
“We are going to have increased demand of foreign currency due to a combination of factors such as summer season and festive season,” added Jabangwe.
