Taurai Mangudhla and Livingstone Marufu
AFRICA’S trade finance bank, the African Export and Import Bank (Afreximbank), has made commitment to bailout Zimbabwe with about $1 billion to stabilise the economy.
The Afreximbank on Saturday evening signed a memorandum of understanding with the Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya, for a $600 million nostro stabilisation facility that constitutes the bulk of the global figure to be extended to Zimbabwe.
Finance and Economic Development Minister Patrick Chinamasa, said the RBZ is working on a number of new facilities with the Afreximbank including the nostro stabilisation facility.
“As you are aware the Reserve Bank is working on a number of new initiatives, the $600 million nostro stabilisation facility to meet the forex requirement for productive foreign payments, the $150 million letters of credit facility to support the importation of fuel as well as fertilisers and feedstock for the manufacturing of cooking oil,” Minister Chinamasa said at a dinner held to officially hand over titled deeds to the Afreximbank for 1,2 hectares prime land for the construction of its Southern African office at Harare’s Newlands.
The fully subscribed dinner was attended by Government officials, former Reserve Bank Governor Gideon Gono and his predecessor Leonard Tsumba as well as bank executives. Minister Chinamasa said the Afreximbank was playing a critical role in Zimbabwe’s arrears clearance strategy.
“As you may be aware, the Afreximbank is the lead arranger to secure funding for the repayment of our arrears of $1,8 billion to the World Bank and the (African Development Bank) AfDB that is essential to our net foreign finance for the country and reduce the country risk,” said Minister Chinamasa, adding the country had chosen to prioritise productivity and economic growth initiatives ahead of the arrears clearance strategy.
“In fact they (Afreximbank) have put this facility already and at the moment the ball is in our court, we decided we must first address fundamental factors such as addressing the issues of budget deficit, addressing the issues of import cover reserves, addressing the issues of reducing the trade and current obligations sustainable into the future, we cannot afford to clear today and tomorrow we are in arrears.
“It’s a long road and I am glad we are equal to the task of travelling that difficult road,” Minister Chinamasa added.Minister Chinamasa said Zimbabwe recognises the indispensable wealth provided by the Afreximbank and numerous credit facilities to this economy over the past two decades. He said the Afreximbank has a number of facilities in an amount of around just under $1 billion to support economic activities in Zimbabwe.
Some of the facilities include the running facilities including the $200 million Afritrades facility to support banking sector stability which basically makes it possible for interbank lending and occupies the position of defacto lender of last resort, the $200 million future flows export facility which gave birth to bond notes as an export incentive to exporters.
“We also have $150 million gold backed facility and another $150 million Zesa facility, a $70 million grain import facility, this is the facility we drew down to import our maize over the past drought and over $150 million worth of facilities having been extended to various sectors of the economy chief among them being the tobacco and tourism facility,” Minister Chinamasa said.
“We are grateful Afreximbank has once again demonstrated its commitment as a permanent development partner for the people of Zimbabwe and Southern Africa and pan Africa.
The withdrawal of international support by multilateral and bilateral institutions and imposed sanctions was indeed difficult but with the help of the Afreximbank and other institutions the journey has been made bearable,” the Minister added.
Zimbabwe is a founding shareholder and the third largest shareholder in Afreximbank after Nigeria and Egypt. The bank’s president Dr Benedict Oramah said the pan African bank is currently processing deals worth about $1 billion for both private and public sector entities in Zimbabwe. And chief among them is the $600 million facility which will support the importation of critical imports until the next tobacco selling season.
“This evening we will be signing a Memorandum of Understanding with the Reserve Bank of Zimbabwe in relation to a $600 million facility which we hope will support critical imports until the tobacco season sets in early next year.
We believe that the facility will help stabilise imports, sustain the recovery Zimbabwe is beginning to witness and stabilise foreign exchange markets and we thank Governor Dr Mangudya for the opportunity.
“The other facilities we are considering to arrange, which are also aligned with national development priorities, will help accelerate the transformation of the Zimbabwean economy, facilitate imports of essential and capital goods, improve national reserve position and enhance foreign currency liquidity in the banking system.”
Afreximbank recognises that long term sustainable growth and development of Africa requires two important strategies, first, a deliberate and concerted effort to decommoditise continental exports through value addition. Secondly, diversification of export markets, promotion of regional integration and intra-African investments.