Zim secures US$250m financing facility

TINASHE MAKICHI

Zimbabwe has secured a US$250m (about ZWL$7bn) financing facility from the Cairo-headquartered Africa Export and Import Bank (Afreximbank) to go towards the financing of the ZWL$18bn economic recovery and stimulus
package announced by President Emmerson Mnangagwa last week.

President Mnangagwa last week unveiled a ZWL$18bn package
aimed at reinvigorating the economy and providing relief to individuals,
families, small businesses and industries impacted by the economic
slowdown caused by the coronavirus pandemic and the attendant
response measures implemented by the government to control the health
crisis.

There have been questions on the mechanisms to fund the economic
recovery and stimulus package with some dismissing it as just hot air.

But Business Times has since been informed that government has

secured close to US$250m from the regional bank which will partly fund
the economic recovery package.

Finance and Economic Development permanent secretary George Guvamatanga confirmed the facility without giving more details.
“Yes we are finalising a financing facility with a regional bank,”
Guvamatanga said without giving details on the identity of the financial
institution.

In March, the African ExportImport Bank announced a US$3bn
Pandemic Trade Impact Mitigation Facility (PATIMFA), to help African
countries deal with the economic and health impacts of the Covid-19
pandemic.

PATIMFA provides financing to assist Afreximbank member countries to adjust in an orderly manner to the financial, economic
and health services shocks caused by the Covid-19 pandemic.

It supports member country central banks and other financial
institutions to meet trade debt payments that fall due and to avert
trade payment defaults.

The facility will assist member countries whose
fiscal revenues are tied to specific export revenues such as mineral
royalties to manage any sudden fiscal revenue declines as a result of
reduced export earnings.

This publication is also informed that government has also approached local banks to provide financing facilities for sectors such as
manufacturing and agriculture while government will provide guarantee
to the loans.

Under the facility, the government allocated ZWL$3.2bn for the Wheat
Cropping Programme due to the fact that agriculture remains a key sector
in the economy and government is committed to ensuring food and
nutrition security.

In a statement this week, Finance and Economic Development Minister Mthuli Ncube said the Covid-19 pandemic required that grain imports are minimised where possible.

To support the 2020/21 Cropping Programme, ZWL$2.880bn was
availed but financing for the 2020/21 Summer Cropping Programme will
continue to be reviewed as the full impact of the Covid-19 becomes
known.

“However, it is anticipated that a significant upward revision of
the resources for the Vulnerable Farmers Input Support Programme
is now necessary and an amount of $2.880bn will be made available to
small scale and communal farmers,” Ncube said.

Under the package, the government allocated ZWL$3.02bn for Working Capital Fund for Industry Sectors. This also entailed the provision of government guarantees of up-to ZWL$2.5bn for bank loans accessed by industry for working capital purposes.

Under this allocation, there will be equity injection of ZWL$500m
to capacitate Silo Food Industries to enable the entity to scale up its
operations while there is a targeted investment of ZWL$20m into the
leather and textiles value chain.

The mining sector will get ZWL$1bn while small to medium enterprises will get ZWL$500m.

The tourism sector will ZWL$500m and the arts and creative sector will
get ZWL$420m.

Ncube said the economic rescue package totals ZWL$18bn (9% of
GDP and 29% of the 2020 Budget) and it is government’s desire to
continue to source resources in order to meet fully the challenges imposed
on people and the economy by the global catastrophe.

Zimbabwe is on its own and cannot get cheap bailout from the International Monetary Fund as it owes other international financial
institutions due to the debt overhang.

In March, the International Monetary Fund (IMF) unveiled a US$50bn coronavirus shock absorber facility for low income and emerging market countries.

The Catastrophic Containment and Relief Trust facility is funded
by grants and Zimbabwe does not qualify as it has no debt service
payment obligation to the fund.

Zimbabwe cannot tap into IMF’s Rapid Credit Facility which helps
countries battered by coronavirus as the southern African country has
arrears to International Financial Institutions.

But Harare wants to buck the trend as it pleaded with international
financial institutions to extricate the economy which is projected to
contract by between 15 and 20% this year. In a letter to IMF managing
director Kristalina Georgieva, Ncube said Zimbabwe faces a gloomy
outlook post-Covid-19.

Ncube said the World Bank Group estimates a financing gap of almost
US$1bn to finance spending for health, education, food security and
social protection of about US$200m was needed for unplanned Covid-19
pandemic expenditure. Ncube said there is no fiscal space to finance the
expenditure.

“Absence of external financing, the budget deficit will have to be financed domestically, which will drastically increase inflation (currently over 500% year on year) and destabilise the exchange rate,” he said in a letter dated April 2, 2020.

“Such financing would be counterproductive to our key objective of establishing macroeconomic stability