7 February 2018

Zimbabwe: Zim Negotiating $1,5bln Loan to Guarantee Foreign Investments

The Reserve Bank of Zimbabwe (RBZ) says it is negotiating a $1,5 billion loan guarantee with the African Export and Import Bank (Afreximbank) to protect foreign investor funds from the country's high risk profile and for liquidity support.

Presenting the monetary policy statement on Wednesday RBZ governor John Mangudya said the country was also negotiating for a seperate $400 million facility for essential imports and to repatriate investor funds.

The country's new President Emmerson Mnangagwa is on a charm offensive to attract foreign investors to the southern African nation but liquidity constraints have made it difficult for investors to repatriate their funds.

Mangudya also put in place several measures to entice Zimbabweans in the diaspora to invest in their home country. It is estimated that between two and three million Zimbabweans are domiciled in the diaspora particularly in South Africa and Britain.

Diaspora remittances play a critical role in the southern African economy, contributing some $782 million to the country's foreign currency inflows between May and December last year.

Mangudya said Zimbabweans in the Diaspora will be allowed to open Investment accounts with local banks which will be ring fenced against with RTGS money.

"The accounts which shall be for savings/investment purposes or for holding funds earmarked for undertaking investment projects in Zimbabwe, shall be funded from offshore and shall be entitled to a 7 percent Diaspora Remittance Incentive from the RBZ over and above the interest charged by the bank," he said.

The central bank will also issue Tobacco and Gold financing bonds to diaspora investors.

"The Diaspora Tobacco Production Financing Bond will be issued to Zimbabweans in the diaspora to finance tobacco production. Bond holders will be paid capital plus interest as single bullet payment at the end of the tobacco season," he said.

A coupon payment for the Gold Production financing bond will be made on a monthly basis as gold is sold to Fidelity Printers and refiners.

Last year the bank introduced a 7 percent tax free Savings Bond to mop up excess liquidity in the market. As at December 2017 $165 million had been raised through the bond.

In order to enhance foreign currency inflows from tobacco and gold production, Mangudya said the Tobacco Input Facility has been increased from $28 million disbursed in 2017 to $70 million while the Gold Support Scheme has been increased from $74 million last year to $150 million.

Mangudya said exports had increased by 36 percent from 2,8 billion in 2016 to $3,8 billion last year.

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