eBusiness Weekly
Martin Kadzere
Some local companies are reported to be failing to get credit from offshore financiers as the Reserve Bank of Zimbabwe is yet to clear legacy debts owed to foreign suppliers by local companies.
In July last year, after the introduction of the interbank exchange control system and conversion of bank balances to Zimbabwean dollars, the central bank assumed the legacy foreign debts of some corporates.
The funds, which the RBZ assumed related to external obligations that could not be remitted between January 2016 and February 2019 due to foreign currency shortages.
At that time, the debts amounted to about US$2 billion.
The foreign obligations swelled as companies failed to pay foreign suppliers due to foreign currency shortages.
At that time, the central bank used a priority list to allocate foreign currency. This resulted in huge foreign currency payments backlog as some companies which would have received goods and services from foreign supplies in advance failed to pay.
Some foreign suppliers eventually stopped credit facilities in the form of raw materials to local firms forcing them to reduce production.
Last year, some airlines threatened to reduce flights to Zimbabwe due to US$196 million debt in unremitted ticket sales.
The central bank assumed the legacy debt on condition that the corporates would surrender their Zimdollar balances at 1:1.
This occurred about five months after the interbank market, which started with an opening exchange rate of 1:2.5 on February 22, 2019, had been introduced.
As a result, the debts were assumed at a lower rate than what was prevailing at the time.
Industry sources told Business Weekly that it was increasingly becoming difficult to borrow offshore due to the legacy debt.
One such company affected is Olivine Industries which, despite its US$8, 3 million loan having been approved by the Africa Development Bank about four months ago is yet to get the money because of the debt.
“We can negotiate for these loans but with this legacy debt in place, it is a very difficult situation,” said a senior industry official who declined to be named.
RBZ Governor Dr John Mangudya said in an interview yesterday payment modalities were being finalised.
“With regards to legacy foreign liabilities of companies, it is work in progress so that the country risk profile can be mitigated,” said Dr Mangudya.
