22 May 2018

Zimbabwe: Govt Clarifies $100m UK Loan, Cash Woes Link

The US$100 million given to Zimbabwe by the United Kingdom reduces demand for foreign currency from the Reserve Bank of Zimbabwe (RBZ)by private firms and the savings will go a long way in easing cash shortages, Presidential Press Secretary Mr George Charamba said yesterday.

Mr Charamba said there was a direct link between the improvement of the cash supply situation in the country and the loan given by CDC, UK's development finance institution.

He said the gesture was an endorsement of policies and measures being implemented by President Mnangagwa's administration to transform the economy.

"The CDC has extended a $100 million facility to Zimbabwe and we are truly grateful for the facility not just in terms of its monetary value, but also in terms of its symbolic value," Mr Charamba said.

"This is the first ever facility we have as Zimbabwe received from the United Kingdom in a very long time and to us it suggests a thawing of relations and readiness on the part of the UK Government not just to re-engage, but also to support the economy under the new dispensation. Without minimising this gesture of goodwill, we ascribe the decision by the UK government to the new policy direction which the new administration has announced both by way of the economic thrust as well as the foreign policy thrust."

Mr Charamba's comments follow the failure by the private media to comprehend the line of credit with the Newsday incorrectly saying President Mnangagwa erred by linking the cash supply situation to the loan.

President Mnangagwa, Mr Charamba said, was "well" aware that the UK facility was meant to support the business community.

"He is equally aware that such a facility to the business community has the positive effect of lessening demand on the Reserve Bank of Zimbabwe to support the retooling exercise as well as purchase of raw materials by the private sector," he said.

"Above all, the facility has the effect of increasing capacity utilisation in the economy including ramping up our exports thereby improving foreign currency receipts. If one considers that the bond note is in fact a surrogate currency, which is linked to our foreign exchange reserves, it's pretty obvious that there is a direct link between the $100 million facility and the improvement of the liquidity situation in the country."

Mr Charamba added: "When politicians are addressing public meetings, within a given time frame, the expectation is that certain connections which are so obvious should be made by those whose duty it is to build knowledge and convey information with completeness."

To improve Zimbabwean firms' competitiveness, the UK and the Standard Chartered Bank partnered to lend companies in the private sector US$100 million.

This is the first direct commercial loan to Zimbabwe by the UK government in over two decades.

The CDC will share the default risk on loans to provide foreign exchange to the Zimbabwean businesses.

Companies in food processing, manufacturing and agricultural sectors are likely to benefit from the loan which is for capital expenditure or working capital.

CDC chief executive Mr Nick O'Donohoe last week said they had been preparing the loan facility from the day former president Mr Robert Mugabe left office.

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