RBZ negotiates US$150m African bank deal

THE Reserve Bank of Zimbabwe (RBZ) says it has negotiated the unlocking of up to US$150 million from the Afreximbank through a Letter of Credit arrangement as part of efforts to widen support towards economic growth.

The Apex Bank Governor, Dr John Mangudya, in his Mid-Term Monetary Policy Statement issued last Thursday, said mobilising foreign exchange resources was critical in oiling the economy at a time when the country and the rest of the world was battling the adverse impact of the Covid-19 pandemic.

To that end, he said Zimbabwe has successfully restructured its obligations with the AfreximBank into a longer-term facility.

The move, explained Dr Mangudya, has reduced the country's repayment burden and unlocked capacity to avail more resources for balance of payments support to the economy.

"The bank has put in place a US$150 million Letter of Credit (LC) facility with AfreximBank, which will see participating banks issue letters of credit to their qualifying clients to import essential raw materials and other inputs to support the current growth trajectory," he said.

"The LC will go a long way in easing pressure on the Foreign Exchange Auction System as some of the critical imports will be financed under this arrangement."

Apart from the Foreign Exchange Auction System, which accounts for around 30 percent of the total market foreign exchange transactions, the RBZ Governor said the interbank foreign exchange market continues to be operational using the auction determined foreign exchange rate. "The interbank foreign exchange market traded around seven percent of total market transactions from January to July 2021," he said.

"Around 63 percent of the market transactions are processed through bank customers' foreign currency accounts."
 
Dr Mangudya said the banking sector remained stable and sound, despite the disruptive impact of the Covid-19 pandemic. The Government support and regulatory relief measures implemented thus far, he added, have cushioned the economy and muted the potential adverse impact to the banking sector's performance.

"The measures ensured continued orderly functioning of the financial markets, continuous flow of credit and fostered financial sector stability," said Dr Mangudya.

As at June 30, 2021, the banking sector comprised 13 commercial banks, five building societies, and one savings bank.

In addition, there were 178 credit-only microfinance institutions, eight deposit-taking micro-finance institutions and two development financial institutions under the purview of the bank. During the period under review, the sector remained adequately capitalised, with aggregate core capital of ZWL$57,54 billion, an increase of 8,09 percent, from ZWL$53,18 billion as at December 31,2020.