RBZ seeks $500m facility

Dr Mangudya

Dr Mangudya

Tawanda Musarurwa and Kudakwashe Mhundwa
The Reserve Bank of Zimbabwe (RBZ) is seeking a $500 million facility to cover the foreign currency gap that will widen when the 2017 tobacco marketing season closes.

Tobacco is Zimbabwe’s top foreign currency earner, accounting for at least a third of the country’s total foreign currency earnings. Speaking on the sidelines of an Economic Symposium hosted by the University of Zimbabwe (UZ), central bank governor Dr John Mangudya said foreign currency was particularly critical insofar as a number of companies in the productive sector had been revived and hence required forex for raw materials.

“There is usually a dry spell between end of August and beginning of March next year, it’s common knowledge. To this extent we are looking for facilities to ensure that we have enough foreign currency to see us through.

“This is the most difficult period of time because we have revived some companies, they need feed stock, they need raw materials, therefore foreign currency becomes critical,” said the governor. “We are negotiating for a facility to the tune of $500 million for that position, because tobacco gave us about $500 million.

The local tobacco selling season is currently winding down, with the Tobacco Industry and Marketing Board (TIMB) last week announcing that beginning this week, auction sales for flue-cured tobacco would be reduced to only two days per week until the close of the marketing season.

The date for this year’s marketing season is yet to be announced, although traditionally the tobacco selling season runs for 90 days. The RBZ governor told the Symposium that Zimbabwe currently has around $1,5 billion in Real-Time Gross Settlement (RTGS) balances (otherwise known as “usable dollars”, hence should have 40 percent (or $600 million) of that amount as foreign currency in nostro accounts.

But currently, the country has around $350 million in its nostro accounts, against the ideal target of $600 million, which was resulting in the cash shortages and fuelling cash premiums on the parallel market.

UZ Economics professor Dr Pheneas Kadenge said the problem facing Zimbabwe is not one of cash shortages per se, but one of constrained output. “We are not in a cash crisis, but a crisis of production,” he said.

According to the central bank, Zimbabwe needs to boost its manufacturing output and exports in order to earn more foreign currency. In this respect, the bank introduced the 5 percent export incentive scheme last year to incentivise the country’s exporters.

Industry has, however, since urged the monetary authorities to increase the incentive to between 10 percent and 15 percent.

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  • kutototo

    People are sleeping in in bank queues and we have a university lecturer telling us we don’t have a cash crisis, no wonder why the president sends his children to universities outside the country, he has no faith in the materials we have in the local universities.

    • Sawubonafish

      What he means is that the cash crisis is a symptom, not the cause of the disease. What Mangudya is proposing, more borrowing, will only address the symptom, not the cause of the crisis. In fact, it will make the problem worse as those loans have to be repaid, using what when the country is not earning enough forex to oil consumptive and investment expenditure, let alone debt servicing. This means the patient, the economy, is no closer to a cure with Mangudya’s stupid approach.

      The current liquidity crisis is a symptom of a fundamental problem: crowding out of the productive sector by govt. insatiable appetite for non-productive spending using treasury bills to mop up liquidity from the market at the expense of the productive sector.

  • mpengo

    He is arrogant, dull and stubborn

    Or simply, he is Gideon Gono reincarnated