Govt to provide guarantees for critical economic sectors
THE Government is considering providing guarantees to the private sector this year related to the ongoing disbursements of the Special Drawing Rights (SDRs) facilities, The Herald Finance and Business can reveal.
The Treasury’s latest Public Debt Report highlights three facilities; the US$7,5 million Tourism Facilities Services Development and Upgrading Revolving Fund, the US$20 million Small Irrigation Infrastructure Development Fund (SIIDF), and the US$10 million Gold Centres and Artisanal Miners Facility.
The Government has already issued guarantees to the horticultural sector under the US$30 million revolving fund.
In August 2021, Zimbabwe received SDR677,4 million, equivalent to US$961million at the time from the International Monetary Fund.
It was part of the US$650 billion the global lender distributed to its members to provide additional liquidity for the global economy, supplementing member countries’ foreign exchange reserves and reduce their reliance on more expensive domestic or external debt.
SDRs are reserve assets issued by the IMF, backed by US dollars, Euros, Yen, Sterling and Yuan.
Banks are often hesitant to lend to private businesses, especially small and medium-sized enterprises (SMEs), due to perceived higher risks. As such, Government guarantees can mitigate these risks by assuring banks that they will be compensated if the borrower defaults on the loan.
This makes it more attractive for the financial institution to lend to the private sector and increasing access to credit to fund production.
The US$7,5 million Tourism Facilities/ Services Development and Upgrading Revolving Fund, accessible through CABS, CBZ and Nedbank, targets struggling tourism businesses impacted by Covid-19.
A total US$1,2 million was disbursed to businesses through CABS in June 2023 for the upgrading and refurbishment of tourism facilities.
Reaching across rural Zimbabwe, the US$20 million Small Irrigation Infrastructure Development Fund (SIIDF) will empower 18 smallholder irrigation schemes across eight provinces (excluding Harare and Bulawayo) through targeted disbursements in 2024 via the national budget.
This vital investment aims to revitalise small-scale agriculture and boost food security for rural communities.
A total of 18 smallholder irrigation schemes, covering about 2854 ha, will benefit 5 708 households. The initiative will go a long way in enhancing climate proofing agricultural production for the vulnerable and ensuring food and nutrition security.
The US$10 million gold centres and Artisanal Miners Facility is for the establishment of six gold centres nationwide and support the purchase of mining equipment by artisanal gold miners.
The six gold centres would offer convenience for small scale miners to access Fidelity Printers and Refiners for gold sales.
The facility is being disbursed through the Ministry of Mines and Mining Development, into the Mining Development Loan Fund.
Out of the US$5 million for artisanal gold miners, US$2 million has already been disbursed in 2023, into the Mining Development Loan Fund and the balance will be disbursed this year, the report says.
In July 2023, US$2 million was channelled through BancABC to ZMDC for setting up gold centres in Mutoko, Penhalonga, Mazowe, Mt Darwin, Shamva, and Silobela.
Government of Zimbabwe has singled out mining, agriculture and tourism among other critical sectors as quick wins to jump start the economy.