Exporters are holding on to more than US$1 billion, amid biting foreign currency shortages in the country, Finance Ministry permanent secretary George Guvamatanga revealed on Tuesday, but government hopes the central bank’s intervention on the forex market this week will help improve liquidity.
Zimbabwe, which requires an average US$3 million for fuel per day and needs to pay foreign electricity suppliers US$80 million to clear the way for power imports, is currently gripped by an energy crisis due to acute foreign currency shortages.
On Monday, the central bank announced an end to centralised forex allocations to fuel importers, who now have to access funds at the interbank exchange rate, as opposed to a fixed 1:1 rate, previously. Forex allocations by the central bank to oil marketers have allegedly fuelled corruption and inefficiency.
The system has also been cited as the major cause behind the inefficient operation of an interbank market for forex, which was introduced late February.
Last week, the domestic currency traded twice weaker on the black market, compared to the official one.
On Wednesday morning, the exchange rate was 1:4.55 on the official market and as high as 1:6 on the black market.
Speaking on ZBC’s Face the Nation on Tuesday night, Guvamatanga said exporters were reluctant to bring their forex into the market.
“Our export shipments for the same period, this year compared to last year, are exactly the same, at US$1.2 billion up to April. What has not actually happened is that the receipts have not been brought in. Exporters have been sitting on that money in their FCAs as well as holding them outside because the law gives them 90 days to hold on to the money,” Guvamatanga said.
Zimbabwe needs US$400 million per month to cover imports, he added.
The law gives exporters 90 days to acquit their export proceeds. Exporters are, however, unhappy about a central bank directive for them to liquidate their forex holdings within 30 days of the funds landing in their accounts. They also want the central bank to revise, upwards, forex retention thresholds which range from 50% to 55% for the biggest exporters; gold, chrome and platinum miners as well as tobacco farmers.
“If all that money had come through as we would have expected, then at least a billion (US dollars) would have come onto the market. If that billion had come in, we would have been able to pay for fuel, we would have paid for cooking oil, we would have paid for electricity. The money is there. I can show you where it is, I have the records. But those whom we have allowed to have the money have kept it and decided not to liquidate the money.”
Guvamatanga, however, acknowledged that lack of confidence in the economy was a major factor in the exporters’ conduct.
“This country has been suffering from lack of confidence. But you have to understand that some of the lack of confidence we create it ourselves. If you are expected to bring in export proceeds and you don’t bring them in and the country is not able to import food, fuel, electricity and we start having queues, we start having load-shedding, we’re actually destroying confidence,” he said.
“What is important is for us to actually understand that we all have a shared responsibility to ensure that the interbank market is a success, which will also result in the success of rebuilding and reforming and restructuring this nation.”
Guvamatanga also revealed that apart from funds yet to be repatriated into the country, exporters also held significant amounts in their local accounts.
“As at Friday last week, in nostro FCAs and in US dollar cash, in the country, we had US$800 million available in the country. We roughly need, for a day’s fuel, US$2-3 million for our requirements of fuel as a country, but we have US$800 million sitting in nostro FCAs, before we even talk about the (US$500 million) line of credit,” Guvamatanga said.
“The challenge has been around having those funds available on the interbank market, which are the issues that were addressed by the (central bank) governor yesterday (Monday). It is not the responsibility of government or the reserve bank to provide the market with foreign currency. It’s industry, the exporters, it’s the miners, the tobacco merchants. They are the ones supposed to bring foreign currency into the country. The government doesn’t generate foreign currency, the reserve bank does not generate foreign currency.”