HARARE, May 3 (The Source) – Zimbabwe’s central bank says the country has reduced its foreign payments backlog by more than 50 percent to $185 million, largely due to forex flows from ongoing tobacco sales and improved dollar deposits.
Businesses, especially manufacturers and mines, have been struggling to make foreign payments since the banknote shortage intensified at the beginning of 2016.
Zimbabwe dumped its inflation-ravaged dollar in 2009, adopting the use of the United States dollar and, to a lesser extent, South Africa’s rand. However, a widening trade gap, on the back of declining local production, and illicit financial flows have left the country in a liquidity trap.
Government has drawn up a priority list for foreign payments and imposed a ban on some imports it deems to be non-essential in a bid manage the little available foreign currency. But mining companies, classified as a high priority sector on the list, have complained of payment delays of up to three months, affecting production.
In a statement on Wednesday, Reserve Bank of Zimbabwe governor John Mangudya said the situation was improving, thanks to a good 2016/17 farming season — chiefly tobacco output and sales — as well as forex facilities availed by the African Export Import Bank (Afreximbank).
Tobacco is the country’s second largest foreign currency earner after gold, grossing $930 million last year. During the ongoing selling season, Zimbabwe had recorded tobacco sales amounting to $206 million by April 24.
“As a result of the increased foreign exchange earnings from agriculture and mining and the Nostro stabilisation facility availed by the African Export-Import Bank (Afreximbank), the Bank has, since the second week of April 2017, been able to allocate US$100 million into the national economy on a weekly basis to meet various foreign exchange demands that include essential imports and payments, feedstock for industrial production and discharging outstanding foreign payments obligations,” Mangudya said.
“These supplementary allocations of foreign exchange by the Bank are over and above the US$1.2 billion of foreign exchange made available by banks to the various sectors of the economy during the period January – April 2017.”
Cairo-headquartered Afreximbank, on the other hand, has been one of Zimbabwe’s most consistent international lenders following the country’s isolation by Western capital, offering several facilities running concurrently and disbursing an average $500 million annually since 2009.
“The Bank’s allocations, which are earmarked for funded bank accounts only, have not only significantly reduced the real demand for foreign exchange but have also reduced the foreign payments backlog by more than 50 percent to the current level of US$185 million,” Mangudya said.
The central bank chief said cash deposits at banks and Nostro holdings had also increased by 50 percent to $450 million.
“The US dollar cash deposits and the foreign exchange held in Nostro accounts are over and above the $140 million of bond notes, $23 million bond coins and an estimated US$400-600 million in circulation in the economy,” he said.
Mangudya added that the central bank would continue to enforce the reduction in transaction costs for electronic transactions, which he said currently account for 70 percent of retail payments.