THE Reserve Bank of Zimbabwe (RBZ) will begin drawing down the $600 million nostro stabilisation facility as early as next week in a move expected to stabilise the situation amid a growing backlog of foreign payments.
BY TATIRA ZWINOIRA
The backlog has created bad blood between local firms and foreign suppliers, with players warning of a shortage of basic commodities.
RBZ governor, John Mangudya said whether there were bond notes or not, inflation would still go up due to real time gross settlement (RTGS) balances being more than foreign currency.
“So what is the solution? The solution is to increase the foreign currency in supply (nostro). Once you increase foreign currency in supply, you will lessen the rates (premiums) so that is why we are bringing in the $600 million so that those things (premiums) go down. Once we put $50m or $100m those things will go down… next week, we will start drawing down on the facility,” he said.
“Zimbabwe is a small economy, so if you were to look for $1 billion (in nostro funds) against the RTGS balances, all those things (premiums) would go away. If RTGS balances on $1,6 or $1,8 billion that is nothing, it is only that we do not have much access to foreign finance.”
Mangudya said the premiums and RTGS balances were symptoms of the major problem of low production leading to low exports.
RBZ negotiated for the enhanced nostro stabilisation facility from Afreximbank to manage “the cyclical nature of Zimbabwe’s foreign exchange receipts”. Afreximbank are guarantors to an export incentive facility. Exporters are paid the incentive in the form of bond notes.
One of the shortages being caused by a lack of foreign currency were fuel, as some service stations were reportedly out of either petrol or diesel on particular days.
Also, critical raw materials are starting to run dry due to unavailability of foreign currency to pay for supplies.
Before, nostro balances acted as assurance for foreign suppliers and they would in turn give credit terms to certain manufacturers.
The continuing depreciation of foreign exchange in the market has led to the RBZ and banks to draw on nostro balances more to service the local market.
As such, the nostro stabilisation facility is expected to ensure that the revival of firms is strengthened and that critical imports of fuel and electricity are assured.
Last week, business said foreign suppliers were reportedly cancelling credit terms with local firms, demanding cash up front before making any deliveries, as the forex crisis in the country continues unabated.