John Mangudya, RBZ Governor (Image: Bloomberg)
The Reserve Bank of Zimbabwe (RBZ) is expecting the country to start drawing down African ExportImport Bank’s (Afreximbank) $500 million nostro stabilisation facility this month, which is aimed at easing the prevailing foreign exchange constraints.
The funding is coming at a time when the country is in dire need of fresh credit lines with the Cairo -based imports and exports bank being Zimbabwe’s biggest benefactor since the turn of the century.
RBZ governor John Mangudya told Business Times that the facility would cover the foreign currency gap that widens when the 2018 tobacco marketing season closed to stabilise the economy in general.
Zimbabwe has so far draw down $50m from the $600m facility unveiled last year.
“We expect the drawdowns from Afreximbank $500 million nostro stabilisation facility will be spread during the period between September and December 2018,” said Mangudya.
Currently, the country’s external payments backlog stands at nearly $600 million, as the central bank struggles to cover all external payment demands.
Mangudya said the economy traditionally experiences a dry spell between the end of August and the beginning of March next year but this year the country has managed to get the facility in time before shortages have begun.
The country is said to be at a good standing as there is still around $100 million from last year’s facility.
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 $450 million would come at a cost of 6,5 percent per annum while the $50 million would attract an interest of 6 percent per annum.
Mangudya said the facility would 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.
Mangudya said Zimbabwe currently has over $1,5 billion in RealTime 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.