ED: $500m forex secured, rules out quick Zimdollar return

Zimbabwe's President Emmerson Mnangagwa arrives for the opening of Parliament in Harare, Zimbabwe, September 18, 2018. REUTERS/Philimon Bulawayo

Zimbabwe has secured $500 million worth of credit lines to ease the liquidity crisis faced by local industry, President Emmerson Mnangagwa told Parliament on Tuesday.

In his State of the Nation Address, Mnangagwa also said Zimbabwe would not rush to reintroduce a local currency, as the economy remains too fragile to sustain it.

“In order to bring sanity in the foreign currency market, my Government, through the Reserve Bank of Zimbabwe, has negotiated a number of foreign exchange facilities amounting to US$500 million to meet the growing demand for foreign currency by business and the public in general. Some of these facilities shall be disbursed this week,” Mnangagwa said.

Mnangagwa did not give details, but the $500 million may include a $250 million credit line announced by UK-based private investment group Gemcorp on Monday.

Zimbabwe is struggling to win foreign credit, including from traditionally friendly nations such as China, because of its poor credit record. Zimbabwe’s debt repayment plan was debated at a meeting on Tuesday between UK ambassador Catriona Laing and Finance Minister Mthuli Ncube.

The country has been chasing debt relief via the Lima plan, under which it proposes rescheduling and cancellation of debts. In his speech, Mnangagwa said this would continue.

“Comprehensive plans will be put in place to expedite the desired outcome towards external debt arrears clearance strategy under the Lima plan,” he said.

Zimbabwe has signed many Memoranda of Understanding over the years, many of which have never been implemented. Now Mnangagwa says he will rummage through these previous MoUs to try and find any that can be dusted off and turned into real investment.

“In a bid to ensure that the nation realises full value from external relations, my Government is, with immediate effect, revisiting all MoUs signed with other Governments but have remained idle, gathering dust and unimplemented by various ministries.”

BIPPAs, which protect foreign investments, will be reviewed to promote investment from across the world, he said.

Ncube recently drew criticism when he suggested that Zimbabwe could scrap bond notes and introduce currency reforms within months. Among Ncube’s options was the introduction of a local unit. But Mnangagwa says a new local currency is still not possible in the near term.

Mnangagwa said he would retain the multicurrency system until the current “negative economic fundaments” have been solved enough to justify the introduction of a local currency. He believes a local currency could only be introduced once Zimbabwe had reserves of three to six months’ worth of import cover and the country had built enough consumer and business confidence.

“These economic fundamentals are yet to be made to justify the introduction of our own currency,” Mnangagwa said.

He pledged state enterprise reforms, saying parastatals can no longer continue to be a burden on the fiscus. Earlier this year, Mnangagwa announced that Government would either sell off or partially privatise 35 state companies. However, progress on this has been slow, although companies such as TelOne and Zimpost have now invited bids for financial advisors for the transactions. Chemplex, the chemicals and fertiser manufacturer, has also been put up for sale.