RBZ bucks Covid-19 challenges

BUSINESS REPORTER

The Reserve Bank of Zimbabwe (RBZ) more than doubled its offshore lines of credit last year to US$1.8bn to oil the economy as it bucked the challenges associated with Covid-19.

The haul was 127% up from the funds accessed by the bank in 2020, the central bank said, signalling its ability to mobilise resources from lenders at a time the global economy was reeling from the effects of the pandemic.

RBZ said the offshore lines of credit used to provide liquidity support to the foreign exchange auction system, refinancing some existing obligations as well as meeting Zimbabwe’s balance of payments requirements.

“Despite the challenges linked to the Covid-19 pandemic, the bank successfully accessed in excess of US$1.8 billion under new and existing revolving external facilities from Afreximbank (including Letters of Credit facilities), Gemcorp and other creditors,” the bank said in its 2021 annual report.

The funds from the accessed offshore facilities went towards providing critical foreign exchange support to the economy for the importation of essential raw materials and equipment for the manufacturing sector, petroleum products, fertilisers, electricity, grains (rice and wheat), crude soya bean oil, medicals, agro chemicals and other raw materials for use by industry, the bank said.

“The offshore borrowings were structured on the back of statutory export receivables from commodities that include high-value minerals. Usage of these facilities significantly contributed to 7.8% growth of the economy through enhancing capacity utilization in the real sectors of the economy,” RBZ said.

The economy has been battling foreign currency shortages despite an increase in exports and drop in imports.

Companies have been struggling to access forex from the auction system, which was introduced in 2020 as a price discovery mechanism for foreign currency. The central bank recently said the auction system has lost its price discovery role after the flouting of the Dutch auction rules, according to critics.

Central bank chief John Mangudya said the auction system will become the “most ideal allocative platform of foreign currency in the domestic economy given the geo-political constraints facing the local banking industry to establish an efficient interbank foreign exchange market”.