DELAYS by the Reserve Bank of Zimbabwe in repatriating over US$2 billion owed to local and international firms will dampen confidence in the southern African nation, which is desperately in need of capital to reboot its ailing economy, a leading economist has said.
BERNARD MPOFU
Despite government promises to improve the investment climate, Zimbabwe is currently ranked at the tail end of the World Bank Ease of Doing Business report due to several bottlenecks faced by investors in setting up business.
According to the latest Finance Act amendments, 580 companies which include the country’s biggest beverage maker and largest bank by deposits are failing to repatriate funds to their foreign shareholders indicating that the economy could be facing a forex logjam.
The Act also shows that the government is liable for a total of US$2.5 billion for funds belonging to foreign counterparties that provided loans and credit facilities “to a person resident in Zimbabwe and was entitled to such payment but could not be paid when the funds were due”.
Prosper Chitambara, an economist at the Labour and Economic Development Institute of Zimbabwe (Ledriz), said failure by the central bank to liberalise the foreign exchange market and Zimbabwe’s current account position had resulted in companies and creditors failing to access the funds.
“This sends wrong messages to both current and future investors. There is an urgent need to liberalise the foreign exchange market instead of having a managed system. This will certainly improve investor confidence, which is currently low,” Chitambara said.
The discrepancy between the official foreign exchange rate and the parallel market movements has failed to narrow down due to erratic supplies of hard currency on the formal system.
The Zimbabwe dollar has continued to lose ground against the greenback as business and consumers continue to buy forex on the parallel market.
By the end of December, the local unit was trading at nearly 110:1 against the United States dollar on the formal market compared to 200:1 on the unofficial market. According to the Act, “all claims arising from the blocked funds shall be validated and reconciled by the Debt Office, for which the office may demand from the creditor concerned the following as may be appropriate — authenticated copies of relevant loan agreement or contract or declaration in the case of dividends.”
A few years ago, the government established the Victoria Falls Securities Exchange as a way of easing the repatriation of dividends offshore, but sceptics say the unlocking of the blocked funds will test the government’s commitment.
