14 November 2012

Zimbabwe: Shot in the Arm for Farmers

Government has unveiled a US$15 million agricultural credit facility to Agribank for lending to A2 farmers for maize production. Speaking at a Press briefing in Harare yesterday, Agribank chief executive Mr Sam Malaba said an initial US$5 million had already been disbursed to Agribank and farmers had started approaching the bank for funding under the facility.

"The facility will be availed to farmers at an all-inclusive cost of 4,5 percent and loan recoveries will be through the stop order system," said Mr Malaba.

He said Agribank would, however, limit the amount of cash to be given to each farmer to US$100 000 to cater for as many farmers as possible. He noted the funds would be given to capable A2 farmers who have a proven track record of good yields and are capable of paying back the loan as Agribank was under obligation to recover funds disbursed to ensure that they become part of a revolving facility to support farmers in subsequent years.

He reiterated that the revolving fund would ensure that Agribank does not wait for Government to provide credit facilities every year.

"To ensure that there is limited abuse of the facility, we will work with the serious farmers that have a good track record. We will do an assessment of the farmers' preparedness for the farming season, their production levels through their dealings with the Grain Marketing Board and also their ability to repay the loan before availing the loans to them," Mr Malaba said.

He noted that the major challenge that farmers have been facing was the high interest rates on loans and said that this facility was going to make it easier for them to repay loans and also be able to produce more grain to support food security through increased grain production to ensure that the country does not import maize in 2013.

Attracting a low interest rate of 4,5 percent, the facility is bound to be attractive to most maize growers around the country. Mr Malaba also said the 2012 economic growth production projections had been revised downwards largely due to the reduction in agricultural output attributed to poor agricultural season.

Meanwhile, the African Development Bank is working on a US$25 million grant to Zimbabwe for technical capacity building in various areas, AfDB economist Mr Damoni Kitabire said. Mr Kitabire said the grant would be applied towards capacity enhancement in the public financial management debt Management and setting up of the Public Private Partnership framework. All the programmes are under the Ministry of Finance.

The grant would also fund capacity building at Zimstat, Zimra, Ministry of Regional Integration and International Cooperation and supporting the roll out of the Medium Term Plan.

"The project has been appraised and will be seeking the bank's approval before the end of this year," Mr Kitabire said.

He said Zimbabwe was making progress towards full engagement with the AfDB to access normal lines of credit. Meaningful financial assistance would resume once the country has fully implemented its liability clearance plan, the Zimbabwe Accelerated Arrears and Debt Settlement Strategy.

The AfDB last year pledged US$500 million to Zimbabwe to help the country liquidate its debt with the regional bank. Zimbabwe owes the regional financier around US$510 million and the debt would be cleared under AfDB's Fragile States Facility.

The FSF was set up as an autonomous special purpose entity within the AfDB to assist eligible fragile states clear their arrears. Zimbabwe has not been able to benefit from AfDB's US$10 billion earmarked for lending to African countries due to the debt it owes the regional bank.

The country owes bilateral and multilateral lending institutions a total of US$10,7 billion and this is seen as one of the major stumbling blocks for access to international credit. Seventy five percent is said to be already in arrears, according to Finance Minister Tendai Biti.

The country is working on engaging the International Monetary Fund for technical assistance under a staff monitored programme aimed at normalising relations and resumption of financial assistance from the IMF.

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