Afreximbank facility to avert fuel crisis

Afreximbank facility to avert fuel crisis
Reserve Bank of Zimbabwe Governor, John Mangudya

Reserve Bank of Zimbabwe Governor, John Mangudya

A $600 million nostro stabilisation facility from the African Export and Import Bank (Afreximbank) will largely support fuel and electricity imports as well as critical government obligations, sources said this week.
The development will have “a substitution effect”, with export receipts that had been directed towards power and fuel imports now going towards funding for critical private sector imports, a banker said.
“Export receipts that were previously funding electricity and fuel imports will now go towards supporting other imports,” said the banker.
He indicated, however, that foreign currency “volumes have come down” after closure of the tobacco selling season.
To mitigate the risk of default on the $600 million nostro facility, the Reserve Bank of Zimbabwe (RBZ) will mop platinum and chrome miners’ export receipts.
Platinum miners were previously retaining 100 percent of their earnings but will now surrender 80 percent of their export receipts to the central bank, which would pay them back using real time gross settlement (RTGS) transfers.
The central bank has in the past week met stakeholders to discuss the deteriorating hard currency situation, which RBZ governor, John Mangudya, said would be alleviated by the Afreximbank facility.
The facility was expected to be released this week. The Afreximbank head of communications and events management, Obi Emekekwue, declined to say if the facility had been released or not, citing confidentiality.
Questions to the RBZ had not been responded to at the time of going to press.
Platinum contributes about 17 percent to total exports, which increased to $3,7 billion in 2016, from $3,6 billion recorded in 2015, according to Treasury statistics. Mineral exports amounted to $2,2 billion last year, from $2,1 billion in 2015, with major contributors being gold and platinum group of metals (PGMs).
PGMs generated $781,5 from exports last year, and are this year projected to earn $789,2 million in export receipts, according to government figures.
Chrome exports, which had been banned by government to force beneficiation, are projected to earn $300 million this year, according to Mines and Mining Development Minister, Walter Chidhakwa. Chrome, including high carbon ferrochrome, exports last year generated $146 million.
Banking sector sources said much of the funding from the Afreximbank’s nostro stabilisation facility would go towards critical imports like fuel and electricity as well as other government obligations. These may include support to diplomatic missions, vehicle purchases and international travel by the executive and government officials.
Fuel imports, which topped the import bill during the first half of this year, gobbled up $376 million from export receipts, while $121 million was spent on electricity imports during the same period, bring the total bill for both electricity and fuel imports at $497 million.
Both fuel and electricity are important to the normal functioning of the economy.
The sources said unlike exports which generate foreign currency that could easily replenish the facility, fuel, electricity and government expenditure lines did not generate hard currency to enable repayment.
Therefore, the RBZ wanted foreign currency generated by chrome and platinum miners, who had so far been allowed to keep their earnings, to ensure it did not fail to pay back Afreximbank.
Mangudya announced during his mid-term monetary policy statement at the beginning of August that the RBZ would, with immediate effect, take control of foreign exchange receipts from platinum and chrome. He said this was already happening with gold, diamonds, tobacco and cotton producers, who were receiving cash in the form of RTGS transfers, now a form of local currency unsupported by physical notes.
Mangudya admitted that the RBZ was taking platinum and chrome miners’ export earnings because the nostro stabilisation facility should be “supported by a continuous stream of export receipts”.
In fact, Mangudya indicated “critical imports of fuel and electricity are assured” under the Afreximbank facility. He also noted that it would strengthen revival of firms.
Mangudya said the facility shall be available for drawdown after the closure of the tobacco selling season.
The tobacco selling season closed on August 11, although contract sales are expected to last until this week.

  • JRR56

    Hmmm the more you stir it the more it stinks. Stupid Zimbabweans will vote for the decrepit fool when he is dead according to ZANU. Good luck with that…..

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