BERNARD MPOFU IN BULAWAYO
Government should immediately inject $200 million into the system to address the cyclical foreign currency crunch affecting local industry, which is currently battling to stay afloat, Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said on Tuesday.
Since adopting the multi-currency regime, the country’s manufacturing sector, once of the most diversified in the region—has been struggling to access concessionary funding to retool and access throughput materials offshore. This has seen many companies formed during the Universal Declaration of Independence era folding due to unsustainable business models.
Estimates from the country’s industrial lobby group show that foreign currency backlog for companies hovers around $500 million to $800 million.
Jabangwe told journalists on the sidelines of the CZI annual conference that government should consider extending more support to the cotton sector to ease the perennial foreign currency shortages which usually worsens after the tobacco marketing season.
“All members are currently in pain. When the tobacco marketing season commences, complaints about currency are not as much but when they close… like in September, that is when you see the rate going the other way,” Jabangwe said.
“What should happen is government should now come up with an injection, about $200 million to stabilise the forex situation. That is a short term but the long term solution is to support cotton.
Cotton is usually ginned between July and December. We used to have about $200 million from cotton and that was enough to ease the currency crunch. As a country, this is the period where we have peak demand in terms of forex demand.”
Zimbabwe has a trade imbalance that has forced the Reserve Bank of Zimbabwe to come up with a foreign currency priority allocation list as part of desperate measures to manage foreign currency.
The foreign currency shortages have also forced local companies to turn to the parallel market to access the green back which is currently trading at a premium of 100 percent on bank transfers.
Government is currently engaging multilateral and bilateral creditors to restore relations before accessing long term capital at affordable rates.
Harare is seeking to clear the $1,2 billion arrears to the World Bank and $600 million to the African Development Bank in order to attract fresh funding.
Already government has cleared the $108 million IMF arrears using special drawing rights holdings and is now seeking up to $2 billion to stimulate economic activity.
Last month, Zimbabwe approached the Chinese seeking to ease the country cash shortages as well as stimulate economic growth but the southern African nation ended up receiving commitment to finance its infrastructure projects.
