NMB sheds over US$10m in legacy blocked funds liability

NMB sheds over US$10m in legacy blocked funds liability

TATIRA ZWINOIRA

NMBZ Holdings has removed more than US$10 million in legacy foreign liabilities from its balance sheet after the government assumed responsibility for debts owed to two development finance institutions.

The move marks another step in Zimbabwe’s efforts to resolve blocked foreign currency obligations that accumulated during years of acute foreign exchange shortages and currency reforms.

NMBZ said the Ministry of Finance, Economic Development and Investment Promotion had agreed to settle the debts directly after issuing Treasury Bills (TBs) in terms of Section 52 of the Finance Act No. 7 of 2021.

• Zimbabwe needs to rethink economic policies
• Zimbabwe needs to rethink economic policies
• Forex demand continues to fall
• Digital platforms transfer ZW$8tn

“Included in offshore borrowings for 2024 were loan balances of ZiG173 227 821 and ZiG93 404 221 due to Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden (FMO) and Swedfund, respectively, which formed part of the group’s blocked funds,” the group said in its 2025 annual report.

The liabilities were equivalent to about US$6,55 million owed to FMO and US$3,53 million owed to Swedfund.

“In accordance with Section 52 of the Finance Act No. 7 of 2021, the Ministry of Finance and Economic Development (MoFED), issued TBs amounting to US$13 840 413, at a 0% coupon rate and with maturity profiles ranging from three to twenty years, in settlement of the legacy debts owed to the three funders,” NMBZ said.

It said the parties later agreed that the TBs be transferred back to the ministry, which would make monthly payments until the debt is cleared.

“Consequently, the group no longer recognises these blocked funds liabilities or the corresponding TBs on its balance sheet,” NMBZ said.

The arrangement also covered a separate US$1,4 million subordinated loan from another development finance institution dating back to 2013.

NMBZ said the facility, which carried interest linked to the three-month Libor rate and matured in June 2020, became difficult to service after Zimbabwe experienced severe nostro funding shortages.

“During the year-ended December 31, 2019, due to nostro funding challenges affecting the economy, despite the group having the local currency equivalent of the repayments, not all interest was paid. The group however managed to make some interest repayments during the period,” the group said.

NMBZ said the debt was registered with the Reserve Bank of Zimbabwe following the introduction of the interbank foreign exchange market under Exchange Control Directive RU 28 of 2019.

“On February 22, 2019, the Reserve Bank of Zimbabwe (RBZ) issued Exchange Control Directive RU 28 of 2019, establishing an interbank foreign exchange market and converting existing monetary balances into RTGS dollars, with an initial exchange rate of US$1:RTGS$2,5,” NMBZ said.

The group said it transferred the former Zimbabwe dollar balances to the central bank at a rate of US$1:ZWL1 before the liabilities were later translated using the interbank exchange rate prevailing at the reporting date.

According to NMBZ, the Finance Ministry subsequently approved the legacy debt and issued TBs worth US$1,4 million in favour of the development finance institution.

“During the current year, the funders and MoFED agreed that the TBs be transferred back to MoFED. In turn, MoFED would make monthly payments until the debt is cleared. The bank has therefore derecognised the TBs and the debt from its books,” the group said.

The clean-up has also reduced NMBZ’s exposure to blocked funds-linked government securities.

“The group holds TBs and government bonds amounting to ZiG412 943 000 with coupon rates ranging from 0% to 9,5%,” the group said.

“Of this amount, none are with respect to TBs in lieu of blocked funds following the transfer to MoFED.”

FMO is the Dutch entrepreneurial development bank, while Swedfund is Sweden’s development finance institution with the mission to reduce poverty through sustainable investments in developing countries.