The Reserve Bank of Zimbabwe (RBZ) has completed the vetting of the submissions made by companies and will issue an instrument to guide the clearance of legacy debts which have threatened the viability of the industry, Business Times can report.
The debt burden has spooked businesses and companies, which are finding it difficult to borrow from offshore creditors and financiers.
Most lenders across the world have now become risk-averse when dealing with Zimbabwe companies.
The blocked funds are cash flows generated in Zimbabwe by foreign entities that could not be repatriated to foreign suppliers due to foreign exchange shortages.
Confederation of Zimbabwe Industries president Henry Ruzvidzo confirmed raising concerns on the delays but cited that RBZ has since assured them of clearing the outstanding debts.
“We have been assured by RBZ that they are done with the vetting of the submissions and soon they will be looking at issuing an instrument that will guide the legacy debts clearance process. We raised the issue two weeks ago,” Ruzvidzo said.
RBZ governor John Mangudya was not picking calls when contacted for comment yesterday. In his Monetary Policy Statement last year, Mangudya announced that all foreign liabilities or legacy debts due to suppliers and service providers such as the International Air Transport Association, declared dividends among others shall be treated separately after registering such transactions with Exchange Control.
Industry of late has been raising concerns over continued delays in the issuing of an instrument by the RBZ.
The Apex bank’s Exchange Control, has to date processed and validated blocked funds amounting to US$1.2bn from 730 applications out of 1080 requests.
Of those processed, 299 transactions with a value of US$861m were rejected for various reasons ranging from doubledipping to lack of supporting documentation.
The balance of 350 transactions, with a value of US$457m, was supposed to have been processed by the end of February.
This move by the RBZ to ringfence and delays in the laying out of a settlement roadmap has posed a challenge to productivity as most raw material suppliers have been holding on to their products.
Most companies, for instance, in the cooking oil industry have been facing raw material challenges as suppliers have closed tap until a clear settlement plan of debts is laid out.
These legacy foreign debts, which were assumed by the central bank in accordance with Circular 8 of 2019, covers the period between January 2016 and February 2019.
One of the debt instrument proposed in the past was the US Dollar denominated savings bond which at some point had an interest rate of 7.5% per year, a minimum tenure of one year enjoys tax exemption in line with government policy, has liquid asset status, and is tradable and accepted as collateral for overnight accommodation by the RBZ.
The debt instruments will also be issued to legacy foreign exchange obligations of US$361 million under the RBZ Debt Assumption Act, which was approved in 2015.
Direct lines of credit with suppliers have been impacted resulting in supply chain inefficiencies and cash flow challenges for affected businesses.