'Import ban fuels forex shortages'

'Import ban fuels forex shortages'
Published: 07 September 2017
A ban in the importation of at least 100 basic consumer goods imposed by government last year fuelled foreign currency shortages after recovery of local companies increased demand for forex, Reserve Bank of Zimbabwe governor, John Mangudya, has said.

Mangudya said on Tuesday while the ban - implemented through Statutory Instrument 64 of 2016 (SI 64) - had helped local companies to re-tool, it had turned into a double-edged sword.

"We now have a challenge that SI 64 was a wholesale for all companies to start producing and they have religiously done so. We did stock taking and realised that almost 400 companies have resuscitated their operations because of the SI 64, but these 400 companies now need feedstock because their import content is very high, on average 50 percent," he said.

He said this had "created demand for foreign currency which was not there before SI 64. Banks now have competing needs as people are now importing raw materials, which is good for the economy".

Mangudya said this while addressing retailers in the capital on Tuesday.

According to the Confederation of Zimbabwe Industries (CZI), local manufacturing capacity utilisation jumped significantly by 13,1 percentage points to 47,4 percent in 2016, and from 34,3 percent in 2015, due to the ban.

Mangudya pointed out that as much as this had been positive for the economy in terms of job creation, it was putting pressure on local financial institutions and the central bank.

"This has translated to more demand for scarce foreign exchange and the fact that most of these revived industries are importing almost all their raw materials has not really helped. So you will then see that it is also because of this that the foreign payments backlog has been increasing significantly," said Mangudya.

Most local companies, especially in the manufacturing sector, have also been forced to go for long periods without producing, often sending employees on unpaid leave as foreign payments are taking time to go through.

Zimbabwe - which abandoned its inflation-ravaged dollar in 2009 in favour of a basket of currencies - has been battling an acute foreign exchange shortage, resulting in a foreign payment backlog over the past year as nostro balances have also depleted.

While central bank data indicates that the apex bank has managed to reduce the country's foreign payments backlog by more than 50 percent to $185 million as at end of May, most local companies have had to beg suppliers for extended payment periods as payments fail to go through timeously.

In some extreme cases, foreign suppliers have even closed Zimbabwean accounts on the back of payment delays.
- fingaz
Tags: Importban, Forex,

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