Import ban fuels forex shortages: Mangudya

Import ban fuels forex shortages: Mangudya
Reserve Bank of Zimbabwe governor, John Mangudya

Reserve Bank of Zimbabwe governor, John Mangudya

A ban in the importation of at least 100 basic consumer goods imposed by government last year fuelled foreign currency shortages after recovery of local companies increased demand for forex, Reserve Bank of Zimbabwe governor, John Mangudya, has said.
Mangudya said on Tuesday while the ban ― implemented through Statutory Instrument 64 of 2016 (SI 64) ― had helped local companies to re-tool, it had turned into a double-edged sword.
“We now have a challenge that SI 64 was a wholesale for all companies to start producing and they have religiously done so. We did stock taking and realised that almost 400 companies have resuscitated their operations because of the SI 64, but these 400 companies now need feedstock because their import content is very high, on average 50 percent,” he said.
He said this had “created demand for foreign currency which was not there before SI 64. Banks now have competing needs as people are now importing raw materials, which is good for the economy”.
Mangudya said this while addressing retailers in the capital on Tuesday.
According to the Confederation of Zimbabwe Industries (CZI), local manufacturing capacity utilisation jumped significantly by 13,1 percentage points to 47,4 percent in 2016, and from 34,3 percent in 2015, due to the ban.
Mangudya pointed out that as much as this had been positive for the economy in terms of job creation, it was putting pressure on local financial institutions and the central bank.
“This has translated to more demand for scarce foreign exchange and the fact that most of these revived industries are importing almost all their raw materials has not really helped. So you will then see that it is also because of this that the foreign payments backlog has been increasing significantly,” said Mangudya.
Most local companies, especially in the manufacturing sector, have also been forced to go for long periods without producing, often sending employees on unpaid leave as foreign payments are taking time to go through.
Zimbabwe ― which abandoned its inflation-ravaged dollar in 2009 in favour of a basket of currencies ― has been battling an acute foreign exchange shortage, resulting in a foreign payment backlog over the past year as nostro balances have also depleted.
While central bank data indicates that the apex bank has managed to reduce the country’s foreign payments backlog by more than 50 percent to $185 million as at end of May, most local companies have had to beg suppliers for extended payment periods as payments fail to go through timeously.
In some extreme cases, foreign suppliers have even closed Zimbabwean accounts on the back of payment delays.
newsdesk@fingaz.co.zw

  • TakuT1

    nnn

  • Fuckk Nyoris

    Ko handiti maiti mukaita ban imports you will preseve forex

    • Taxman

      Zimbabwe has been in a comatose for 30 years. Maybe its time to withdraw the life support.

  • Dave

    If over 400 companies are now importing raw material with an import content of around 50%, is that not better than a retailer/end user importing the equivalent finished product at 100% import content? The way I see it, there should be 50% less foreign currency required in this instance. Something wrong with the math!

  • Dave

    If 400 companies are importing importing raw materials at an import content of around 50%, is not that better than retailers/end users importing 100% finished product? Surely there is a saving of 50% somewhere? The math appears not to add up!

    • nelson moyo

      @Dave – In Zimbabwe we say maths –

  • andrew

    Mangudya is so naive, He recommended STI to save forex. He should be fired for recommending something without full analysis in the first place. He doesn’t know economics basics. He should go back and run a bank not a country. This person is worse that Gono.

  • Wilson Magaya

    Interesting. this therefore means that maybe your focus should now turn to the industries that feed into these that import 50% of their inputs. If they import so much why are we protecting them? Is it not better to remove the protection and let customer get the best the world as to offer. It’s time for scenario planning and asking the HARD questions and accepting that maybe just maybe we need to change what we are doing or even change the Forest in which we are working altogether. This is surely pointing to a need for a total relook at our economy and realigning our efforts with our needs. The industry we have was developed in the ’60s for a very different demographic and national vision. today we have more people on the land, mining, farming, dreaming and so on and so forth…..

    It’s time to do another sweep of the whole nation and ascertain where we are and what we are good at and then leverage that. Partner with the best in the world and build new industries that meet the needs of Zimbabwe today and the future (What will Zimbabwe be like in 2050?) “Nyika Vanhu, Musha Matare” Its within us to create the miracles of tomorrow. If not us them whom?

  • nonsi

    Good that you have identified the problem. whats the way forward?

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