RBZ to receive $500 million Afreximbank nostro stabilisation facility

Livingstone Marufu

HARARE – The Reserve Bank of Zimbabwe (RBZ) has negotiated for a $500 million nostro stabilisation facility with the African Export-Import Bank (Afreximbank) to ease the country’s liquidity constraints.

As exports continue to sag against higher imports, the apex bank has turned to the regional bank to manage the cyclical nature of Zimbabwe’s foreign exchange receipts.

The facility is expected to cover the foreign currency gap that will widen when the 2018 tobacco marketing season winds up in the next three weeks and to stabilise the economy in general.

RBZ Governor Dr John Mangudya told Business Times that the country is expecting to receive the facility by end of August to cover industry’s foreign payments backlogs and importation of essential commodities.

“Traditionally we experience a dry spell between the end of August and the beginning of March next year. Therefore, in order to bridge this, we have negotiated for a $500 million facility from our all-weather credit bank Afreximbank to ensure that we have enough foreign currency to see us through that period,” Mangudya.

“This year we will get the facility much earlier to ensure that there is no gap in terms of foreign currency supply in the market…. Terms and conditions for the facility will be the same as last year’s.”.

The facility, according to the central bank will be in two tranches of $450 million (Tranche A) and $50 million (Tranche B).

The offshore loan facility will be approved on condition that the $450million would come at a cost of 6,5 percent per annum while the $50million would attract an interest of 6 percent per annum.

Mangudya said the facility will have a 36 months tenure but given the huge demand for foreign currency challenges and foreign payments backlogs the money is required to start servicing the market in August.

The facility will be guaranteed by the Ministry of Finance and Economic Planning.

The loan is meant to finance existing facilities, pre-financing of gold exports and payment of fees and costs. 

Outstanding balance from last year’s $600 million facility
Mangudya said the country is still drawing down from last year’s $600 million facility hence there was no need to take $600 million.

“So far we have drawn down $495 million from last year’s $600 million facility and this week alone we have drawn down $45 million for fuel, electricity and other essentials on the priority list.

“The facility is meant to stabilise the economy by ensuring that strategic and essential products continue to be available within the Zimbabwean economy,” he said.

RBZ is disbursing the facility in batches to ensure the country spreads foreign currency to competing requirements gradually.

Addressing forex and cash shortages
Mangudya said in order to address foreign currency shortages, Zimbabwe was re-engaging with the international community and creating a conducive investment environment for foreign direct investments (FDI).

This will increase foreign currency inflows through investment and stimulate production and exports.

He said Government has improved the country’s investment climate after it undertook several reforms such as toning the Indigenisation and Empowerment deals.

The central bank chief said foreign investors were guaranteed of repatriation of their dividends through direct support from the central bank under the nostro stabilisation facility.

“We are disbursing an average of $100 million monthly to service the market and stabilise the economy by ensuring that strategic goods and services are available in the country and that cash is readily available to the banking public.

“Due to the demanding nature of forex in our economy we are injecting extra $20 million or $25 million into the economy depending on amount of pressure at hand.

“However, this month we have been forced to put an additional $50 million to guard against shortages of essential products and services.

“This month alone, over $150 million was put into the economy to deal with cash, fuel, electricity and edible oil pressures…,” said Mangudya.

RBZ Governor said Zimbabwe currently has over $1,5 billion in Real-Time Gross Settlement (RTGS) balances (otherwise known as “usable dollars”, hence it should have 40 percent (or $600 million) of that amount as foreign currency in nostro accounts.

Zimbabwe is a founding shareholder and the third largest shareholder in Afreximbank after Nigeria and Egypt.

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