HomeNewsGovt, Afreximbank launch cheap credit

Govt, Afreximbank launch cheap credit


Government has launched a $100 million line of credit, which would be disbursed at lower than market lending rates to boost Zimbabwe’s economic revival and trade.
The credit line – known as the Zimbabwe Economic and Trade Revival Facility (ZETREF) — is financially backed by the African Export-Import Bank (Afreximbank), Zimbabwe’s largest financier at the moment.
The money will be disbursed through designated commercial banks in two tranches, starting with a drawdown of $70 million.
Afreximbank has contributed $50 million with government committing $20 million from its International Monetary Fund (IMF) special drawing rights.
Finance minister Tendai Biti said the facility would initiate a market correction of interest rates, which currently range from 14% to as high as 30% per annum.
“The liquidity crunch, the high cost of money and the short-term nature of credit facilities in the domestic financial market have undermined industry’s efforts to recapitalise and rebuild capacity utilisation,” he said.
The level of plant utilisation in the manufacturing industry is estimated to have plateaued around 30%, largely owing to an enduring liquidity crisis, which has forced many firms to dilute through equity offerings.
A number of mining companies have rejected local credit facilities are both too expensive and too short in terms of tenure, and this has held up the pace at which the sector is recovering.
“May I, therefore, take this opportunity to appeal to and also warn those qualifying commercial banks that they are expected to stick to the essence and thrust of this facility, which is on-lending to the private sector at comparably cheaper rates than those currently obtaining on the market,” Biti said.
The country’s head of Treasury, however, admitted government has found it difficult to attract substantial lines of credit as a result of the country’s low creditworthiness, which deteriorated heavily over the decade of economic downturn.
For the whole of last year, lines of credit amounted to $656 million, about a third of industry’s recovery short-term requirements.
The government-secured facilities slowed to $200 million in the first half of the year.
“The recovery of our economy will remain a pipe dream without the rebounding of the private sector,” Biti said.
“Thus government was compelled to explore avenues aimed at facilitating the resuscitation of the private sector by way of securing injections of fresh working and medium and long-term capital.”

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