RESERVE Bank of Zimbabwe governor, John Mangudya, yesterday disclosed that the central bank is working on an additional US$400 million nostro stabilisation facility to deal with delays in the processing of foreign payments.
During 2017, the central bank made nostro facilities amounting to US$1,1 billion available to fund critical imports such as fuel, electricity, medicines, fertilisers, agro-chemicals, soya crude oil for cooking oil, cash imports and raw materials for industry, Mangudya said.
Presenting his monetary policy statement for the current year, Mangudya said the facility would ensure that critical imports were supported by availability of foreign currency.
“The bank is enhancing the nostro stabilisation facilities by US$400 million to provide assurances that international remittances and individual foreign currency inflows received through normal banking channels are available for use when required by owners,” said Mangudya.
He added that the facility would also help the country “meet the foreign exchange requirements for the importation of essential requirements that include fuel, medications, electricity, cash imports and industrial raw materials for the manufacture of cooking oil, other food products, packaging and exports”.
Last year, the RBZ secured US$600 million for the nostro stabilisation facility from the Cairo-headquartered African Export Import Bank to mitigate a foreign currency crisis that had affected imports and consequently the availability of basic food commodities. An additional US$500 million was secured from the same continental bank to back the RBZ’s export incentive programmes.
The nostro facility supported critical imports such as fuel and electricity, which the country has been importing from regional suppliers such as Eskom of South Africa and Hydro Cahora Bassa of Mozambique, who last year threatened to terminate supplies due to cumulation of arrears.
The country’s productive sectors have experienced problems procuring raw materials and machinery due to foreign currency scarcity in the country.
The foreign currency crisis has been blamed in part on the perennial current account deficit.
Mangudya also disclosed yesterday that Zimbabwe was accelerating efforts to clear arrears with the African Development Bank and the World Bank amounting to about US$1,7 billion.
Zimbabwe paid US$110 million owed to the International Monetary Fund’s (IMF) in terms of an arrears clearance plan tabled to international creditors in Lima, Peru, in 2015.
Implementation of the plan had been suspended by government due to unavailability of funding for the arrears clearance plan, which government later wanted to fund using unmined mineral resources as collateral for borrowings related to the plan.
President Emmerson Mnangagwa recently emphasised the need for the country to deal with its debt problem, which has prevented Zimbabwe from accessing offshore funding for its capital-starved economy.
Clearing arrears, Mangudya said, would reduce the country’s risk premium and unlock offshore credit lines at affordable interest rates.
He added that access to offshore funds, which has been limited over the past 17 years, was critical to increase the foreign currency buffer for the country.
“In line with the new economic order, government is intensifying the re-engagement process with the international community to improve international relations and to resolve the external payment arrears to the remaining international financial institutions (IFIs) as well as bilateral creditors. In this regard, government will follow the previously agreed process for clearing external payment arrears to IFIs, which was endorsed by the IFIs and bilateral creditors at the meeting held on the sidelines of the annual meetings of the IMF and World Bank in Lima, Peru in October 2015,” said Mangudya.