Zim’s US$800m forex re­serve gap

The Sunday Mail (Zimbabwe) - - BUSINESS - Martin Kadzere

ZIM­BABWE re­quires a for­eign cur­rency cover of US$1 bil­lion, against cur­rent re­serves of US$200 mil­lion and needs to fur­ther in­crease pro­duc­tion to nar­row the gap, an of­fi­cial has said.

Ms Jes­i­men Chipika, deputy Gov­er­nor of the Re­serve Bank of Zim­babwe, told del­e­gates at­tend­ing the Con­fed­er­a­tion of Zim­babwe In­dus­tries con­fer­ence in Bu­l­awayo last week that boost­ing ex­ports will help the coun­try out of the cur­rent sit­u­a­tion.

“We are look­ing at US$1 bil­lion for­eign cur­rency cover but we only have $200 mil­lion,” Ms Chipika said.

Zim­babwe wiped out the hy­per­in­fla­tion fig­ures in 2009 when it aban­doned use of the Zim­babwe dol­lar for a bas­ket of for­eign cur­ren­cies, but mostly dom­i­nated by the US dol­lar.

Over the past two years, the econ­omy has been fac­ing se­ri­ous for­eign cur­rency short­ages, with the for­eign pay­ments back­log bal­loon­ing to over US$700 mil­lion last month. For­eign cur­rency short­ages are partly re­sult­ing from sub­dued ex­ports.

The cen­tral bank has been ar­rang­ing lines of credit to ease the short­ages, but this has had mar­ginal im­pact as de­mand for hard cur­rency has con­tin­ued in­creas­ing as pro­duc­tion in­creases.

Mea­sures such as the in­tro­duc­tion of the Statu­tory In­stru­ment 64 of 2016, which restricted im­ports of goods that could be man­u­fac­tured lo­cally, trig­gered re­vival of the in­dus­try. SI 64 of 2016 was then con­sol­i­dated with var­i­ous im­port li­cens­ing reg­u­la­tions un­der Statu­tory In­stru­ment 122 of 2017.

Some com­pa­nies are now op­er­at­ing at nearly 100 per­cent ca­pac­ity.

As a re­sult, this has in­creased the de­mand for for­eign cur­rency as the com­pa­nies need to im­port raw ma­te­ri­als.

Ac­cord­ing to the cen­tral bank, com­pa­nies that have reg­is­tered sig­nif­i­cant im­prove­ment in­clude pro­duc­ers of food prod­ucts, bev­er­ages, pack­ag­ing, medicines, leather and footwear.

These in­clude Delta, Na­tional Foods, Lo­bels, Baker’s Inn, Tregers, Dairi­board, Dan Dairy, Nes­tle, Nam­pack, Mega Pack, Hun­yani, Brown En­gi­neer­ing, Bata, Sable, Chemplex, ZFC, Wind­mill, FSG and cook­ing oil com­pa­nies.

“We need to have pro­duc­tion of goods and ser­vices,” said Ms Chipika.

“The econ­omy was slid­ing from 2011 to 2016. If we had not put in place ex­pan­sion­ary mea­sures, the econ­omy would have slid into re­ces­sion — neg­a­tive growth. But some mea­sures res­cued the sit­u­a­tion,” she added, in ap­par­ent ref­er­ence to ex­port in­cen­tives in­tro­duced by the cen­tral bank to boost ex­ports about two years ago.

Ms Chipika said since the be­gin­ning of the year, the econ­omy has been ex­pe­ri­enc­ing growth.

The Gov­ern­ment had pro­jected that the econ­omy would ex­pand 4,5 per­cent this year, but is now op­ti­mistic that growth could be as much as 6 per­cent, un­der­pinned by strong per­for­mance in the min­ing, man­u­fac­tur­ing, con­struc­tion and agri­cul­ture sec­tors.

The World Bank, which is more con­ser­va­tive, has also re­vised the growth rates from the 1,8 per­cent pro­jected in Jan­uary to 2,7 per­cent.

Ac­cord­ing to fig­ures from the cen­tral bank for Jan­uary 2018, on a cash ba­sis, and the lat­est trade fig­ures from the Zim­babwe Na­tional Sta­tis­tics Agency for the five months to June this year, the coun­try’s trade deficit widened by 44 per­cent dur­ing the first half of the year to US$1,4 bil­lion from $1 bil­lion recorded in the same pe­riod last year.

The deficit in­di­cates that more im­ports were largely to­wards the pro­duc­tive sec­tor. Im­ports for con­sumer goods fell 34 per­cent to US$401 mil­lion from $610 mil­lion.

Ms Chipika en­cour­aged the pri­vate sec­tor to be re­spon­si­ble cor­po­rate cit­i­zens by hon­our­ing their tax obli­ga­tion, cur­rently at US$4,2 bil­lion.

On cur­rency re­forms, the deputy gov­er­nor said the US dol­lar will re­main Zim­babwe’s an­chor cur­rency un­til macroe­co­nomic fun­da­men­tals are ad­dressed, in­clud­ing achiev­ing a four months im­port cover.

She warned that any rushed at­tempt to re-in­tro­duce the lo­cal cur­rency would push the econ­omy into hy­per­in­fla­tion.

“If we rush to in­tro­duce the lo­cal cur­rency, we will go back to 2008 and we don’t want to do that,” she said.

The CZI con­fer­ence, run­ning un­der the theme ‘From Di­a­logue to Im­ple­men­ta­tion, It’s time to Act’, was at­tended by sev­eral lo­cal busi­ness lead­ers, Gov­ern­ment of­fi­cials and in­ter­na­tional busi­ness or­gan­i­sa­tions.

Some of the is­sues that were dis­cussed in­clude in­dus­tri­al­i­sa­tion drive, fi­nanc­ing models of re-tool­ing com­pa­nies, progress and chal­lenges in im­prov­ing ease of do­ing busi­ness.

The liveli­est ses­sion was ar­guably the one ad­dressed by for­mer Botswana Pres­i­dent Mr Ian Khama who ex­pressed op­ti­mism on Zim­babwe’s turn­around prospects, but em­pha­sised the need for the new dis­pen­sa­tion to re­spect rule of law, tack­ling cor­rup­tion and em­brace good gov­er­nance.

He also gave in­sight into how Botswana di­ver­si­fied and suc­cess­fully lever­aged di­a­monds for eco­nomic de­vel­op­ment.

Newspapers in English

Newspapers from Zimbabwe

© PressReader. All rights reserved.