To assist local manufacturers in the face of an ongoing massive foreign currency shortage, the Reserve Bank of Zimbabwe (RBZ) has launched a US$400-million letters of credit (LOC) facility so they can import the raw materials they need for production.
RBZ governor, John Mangudya, said in a statement that the central bank had already begun processing the letters of credit this month. He believes the US$400 million allocated should cover manufacturers’ needs for two months.
The move follows an appeal for government assistance from manufacturing lobby body, the Confederation of Zimbabwe Industries (CZI), which pointed out that production in the country would grind to a halt by month end if manufacturers could not access funding for imports.
Minister of Industry and Commerce, Mangaliso Ndlovu, admitted to the New Zimbabwe newspaper that this was merely a stop-gap measure to “bridge the current forex shortages and the need for industry to produce”.
But analysts warned that this was a big risk for any government with a floundering economy to take. “The risks being carried by government could be overwhelming and the moment it defaults on payment, the situation could worsen the already troubled economy's ratings,” said Chris Mugaga, CEO of the Zimbabwe National Chamber of Commerce (ZNCC).
