30 June 2019

Zimbabwe: Agribank Weighed Down By Foreign Debt

State-owned Agribank says it is struggling to pay up to $30 million in loans secured from South Africa-based Industrial Development Corporation (IDC) due to foreign currency shortages.

Agribank CEO Sam Malaba said the bank had been exposed to more forex liabilities since the floating of the exchange rate in February this year, which removed the 1.1 peg between the bond notes and United States dollar.

"Since the floating of the exchange rate in February 2019, the bank is exposed to forex revaluation loss as it has more forex liabilities than forex assets.

"Threats will also come from an IDC SA legacy debt wherein repayments are lagging behind schedule due to shortage of foreign currency.

"As at 31 May 2019, US$20 290 319 due to IDC was in arrears," Malaba told the annual general meeting last week.

IDC SA extended a US$60 million credit line facility in 2012 in two tranches of US$30 million and by 2016 Agribank had managed to repay US$17 million of the first tranche with the other US$30 million remaining.

Last year the bank secured another US$30 million credit line, which is yet to be drawn down from the same institution.

The bank, which was on the sanctions list before being removed in 2016, has been relying on regional financiers to access lines of credit to fund the agriculture sector-related value chains.

The financial institution has been entrusted to administer the distribution of mechanisation equipment from a government- mobilised US $100 million facility.

Authorities want the bank to assess farmers' creditworthiness through the credit bureau so as to limit defaults and as well ensure transparency and efficiency.

Farmers will also access the equipment based on productivity history.

The bank recorded profit of RTGS$4,6 million for the five- month period of 2019 ending May 31 above the budgeted profit of RTGS$3,8 million driven by non-interest income and interest income, reflecting marked loan book growth during the year.

Growth in non-interest income was mainly due to increased transactions from the ICT delivery channels and electronic banking.

The bank said operating expenses had been growing rapidly due to the high inflation and exchange rate movements.

It was of the view that the operating environment would remain depressed due to inflation that would translate into increased pressures to raise staff salaries.

"There is pressure on staff and other expenses as inflation continues to rise," Malaba said.

"Revenue growth is going to be difficult given that the tough operating environment will affect quality loan book growth as creditworthiness of customers declines."

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