Govt crafts blocked funds Bill

PHILLIMON MHLANGA

The Government is crafting a Bill which will enable the central bank to settle the long standing foreign debt burden incurred by local companies.

The move comes at a time when the legacy debt to foreign creditors has continued to hinder industry recovery.  The viability of several companies has been under serious threat as the unsettled foreign obligations have seen some suppliers of critical raw materials stopping supplies to Zimbabwe.

The situation has left companies with a huge financial burden on their books.

Central bank governor, John Mangudya, said the legal instrument will cover for unsettled foreign exchange liabilities.

“We are now finalising a legal instrument. We want to ensure that we put an Act in place,” Mangudya said.

 “We have found some pathway which is being refined. Beneficiaries shall be advised because we want to clear those blocked funds.”

Mangudya added: “The legal instrument will be given to all beneficiaries of blocked funds. The instrument will be saying the government is prepared and will ensure that we expunge the blocked funds.”

The blocked funds have been choking local firms and the delay in settling these local firms continues to negatively affect companies’ balance sheets making it difficult for companies to court foreign suitors, who demand clean balance sheets before injecting fresh international capital.

Mangudya also disclosed that at least US$426m has already been paid off to various suppliers.

“We do not want Zimbabwean companies to be closed from being supplied or cut supplies because of these blocked funds,” he said.

Mangudya said the bank was also discussing the matter with the Public Accountants and Auditors Board which regulates the accounting profession in Zimbabwe and the Institute of Chartered Accountants of Zimbabwe.

Most of the financial results for local companies, published recently, show that delays in settling foreign obligations were weighing down the operations of companies that have lodged their applications for relief with the central bank.

This has seen companies with significant foreign debts sinking deeper into dire straits due to currency volatility and exchange rate fluctuations, with their balance sheets being increasingly eroded and foreign currency liabilities ballooning.

This has left most of the companies technically insolvent and on the brink of bankruptcy. The RBZ, in 2018 directed companies to transfer balances at 1:1 to the apex bank, as it plans to pay foreign creditors on behalf of the local companies.

Following the declaration of the Zimbabwe dollar as the sole legal tender through Statutory Instrument 142, which effectively outlawed the use of the United States dollar and other external currencies, some companies have suffered exchange losses mainly arising from their foreign obligations.

There have been, however, fears that the central bank will struggle to honour the commitment given that the country has been reeling from foreign currency challenges, over a period of time, liquidity crunch and cash crisis.