RBZ rejects US$861m legacy debt claims


The Reserve Bank of Zimbabwe (RBZ) has rejected about US$861m legacy debt claims for lack of supporting documents and double-dipping, central bank chief John Mangudya has said, as the bank moves to clear the blocked funds.

The apex bank’s Exchange Control, however, processed and validated blocked funds amounting to US$1.2bn, Mangudya said Monday while presenting his 2020 Monetary Policy Statement.

The viability of several companies has been under serious threat as a result of legacy debts, denominated in foreign currency following far-reaching currency reforms by the government in June last year.

The debt burden had 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.

 “To date, Exchange Control has processed and validated blocked funds in an amount of US$1.2bn from 730 applications out of 1 080 requests,” Mangudya said.

“Of those processed, 299 transactions with a value of US$861m were rejected for various reasons ranging from double-dipping to lack of supporting documents.”

The balance of 350 transactions with a value of US$457m is being processed for finalisation by February 29, 2020, Mangudya said. He said the validated blocked funds exclude the legacy foreign exchange obligations of US$361m under the RBZ Debt Assumption Act.

Mangudya said the bank would focus on liquidity management to ensure that the stock of money does not cause inflation or bring volatility to the exchange rate.

This comes after about 50% of the total bank deposits amounting to about ZWL$34.5bn was in the hands of about 200 entities at the end of December 2019.

The bank also put measures to enhance the Reuters foreign currency interbank market tracker system. Mangudya said the RBZ was committed to improving the operation and efficiency of the interbank market. The system went live on a trial basis in December last year.

The central bank also increased the limit under the Medium-term Bank Accommodation window, meant to support banks with productive sector funding requirements, to ZWL$1.5bn from ZWL$1bn.

Mangudya said the increase was meant to cater for the winter agricultural preparations.

The central bank has also resolved to maintain the policy rate on overnight accommodation at 35% per annum.

The apex bank, Mangudya said, will continue to gradually increase the notes and coins in the market. It targets 10% of total deposits. Currently, the amount in circulation is ZWL$1.1bn, which is about 3.2% of total bank deposits.

Banks have also been directed to submit capitalisation plans by June 30, 2020, in which top tier banks should have minimum capital threshold equivalent to US$30m.

Mangudya said holders of free funds that funds “are very safe and secure in Zimbabwe”.

“The same is true for all other foreign currency accounts and that the current export retentions are being maintained at their current levels,” Mangudya said.

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