Finance and Economic Development Minister Patrick Chinamasa has said the projected strong economic growth this year has increased the demand for foreign currency in the country.
Speaking at the handover of land and deed of transfer to Afreximbank for its regional office in Harare, Minister Chinamasa said unlike other countries which had recourse to more budget financing options, Zimbabwe had to fund its deficit using real resources in the form of forex.
“In 2017, the Zimbabwean economy is projected to register a strong positive growth on the back of agriculture, mining and tourism,” he said. “As the economic recovery gains traction, we have also noticed that the demand for foreign currency is increasing.
“We run the risk of retarding the economic growth if the country fails to secure foreign exchange for the feedstock into the economy.
“It is against this background that I am appealing to the board and management of Afreximbank to provide the much needed assistance, especially during this foreign exchange dry period.”
The dry period between September and February derived from the closure of the tobacco marketing season.
To oil the dry market, RBZ will this week introduce a $600 million nostro stabilisation facility from the Cairo-headquartered African Export Import Bank (Afreximbank) to start addressing the foreign currency shortage on the market.
Furthermore, the central bank is allocating an additional $30 million a week for basic and essential commodities importation with an additional $15 million being spent on fuel and electricity imports.
The country’s economic growth was reviewed to 3,7 percent after the strong performance of import substitution programme, Command Agriculture Scheme and mining.
This has naturally created high demand for foreign exchange and made it difficult for Government to service all growing economic sectors due to the fact that every forex earned is going to the critical import priority list instead of reserves.
With the success of Command Agriculture and import management programme known as Statutory Instrument (SI) 64, more than 350 manufacturing firms were revived and require the much needed forex to buy critical raw materials.
“The increasing demand for foreign currency is also emanating from the fiscal side, which is currently running deficits which are meant to finance the developmental agenda of this country,” said Minister Chinamasa.
“We have no doubt that with increased co-operation from Afreximbank and other regional developmental partners, the gap will be filled.”
The signing of a $600 million Memorandum of Understanding was done on Saturday to pave way for the stabilisation facility to kick start this week.
He said the country remained greatly indebted to the pan-African bank for the critical lifeline support that is geared at rejuvenating economic activity which is an essential ingredient to current efforts.
Afreximbank, which has developed into the country’s all weather friend, bailed out Zimbabwe from 2001 after the imposition of sanctions on the country by United States of America and its European allies.
Afreximbank has come to be a permanent developmental partner to Zimbabwe.
Minister Chinamasa said, “We have travelled together a long road. The withdrawal of international support by multilateral and bilateral institutions about 20 years ago and the imposition of sanctions against Zimbabwe was indeed difficult, but with the true friendship and partnership of Afreximbank and other regional financial partners, the journey has been made bearable so far.”
Reserve Bank of Zimbabwe Governor Dr John Mangudya weighed in: “African Export-Import Bank came into existence at the right time, at the turn of the century, soon after the suspension of balance of Payments support to Zimbabwe for new and ongoing projects by most multilateral and bilateral creditors.
“The suspension of international support by traditional lenders made it difficult for all sectors of the economy to secure basic financing to support their businesses as capital inflows virtually dried up.
“Afreximbank has steadfastly stood by Zimbabwe throughout, with a determination to ensure that essential trade needs of the country are met. We are indeed grateful for this unique relationship with this great African institution.”
Zimbabwe is the third largest sovereign shareholder of Afreximbank after Nigeria and Egypt.
Afreximbank’s first branch was established in 1996, with Dr Mangudya being its first branch manager.
To strengthen the bilateral ties, Afreximbank will house its Southern African branch offices in Newlands, in the capital.