Local financiers are increasingly reluctant to lend businesses in US dollars at least until they are informed of further policy positions regarding ongoing currency reforms, just over two years before the multi-currency system comes to an end, 263Chat Business has established.
Zimbabwe’s economy is operating under a multi-currency system which is largely in USD currency after its own ZWL currency lost market favor due to its volatility since its reintroduction in 2019.
Last year authorities announced that the multi-currency system will remain in place until the end of NDS 1-a government economic blueprint set to end in 2025.
This was made law through the Presidential Power (Temporary Measures) (Amendment of Exchange Control Act) Regulations 2022.
But this has left the financial markets in limbo as to what stance authorities will take thereafter, especially given that they have already issued a de-dollarization roadmap that is set to pave the way to a mono-currency system anchored on the Zimbabwe dollar.
Business executives at the CEO Africa Roundtable breakfast meeting held this morning expressed concern over the “wait and see” stance being taken by funders when they approach them for long-term funding.
Sources in the business sector also confided with 263Chat Business that financiers feared a repetition of the 2018 scenario where the government through the RBZ liquidated USD balances into the local currency (ZWL) on a 1:1 basis which led to enormous loss of value.
“When we approach some funders hoping to get financing for various projects we are being told that they can’t offer any long-term loans because of the uncertainty around the multi-currency system,” said one executive.
Despite the economy not showing signs of regressing from dollarization, policy makers remain adamant that by 2025 the fundamentals will be sufficient to fully de-dollarize.
“The expectation is that by 2025 we should be out of dollarization. Of course on the ground there are forces that we are currently facing but efforts by the RBZ are proving effective,” Persistence Gwanyanya, who is also a member of the RBZ Monetary Policy Committee told executives at the CEO Africa Roundtable meeting.
There is also great concern over the unresolved issue of conflicting judgments relating to currency insolvency cases at the High Court which has left a thick cloud of uncertainty.
In one judgment issued earlier this year by Justice Joseph Mafusire, CABS is ordered to pay back architects, Stone/Beattie Studio Partnership, US$142 000, which was liquidated at 1:1 into local currency in 2018.
The other judgment also issued this year by Justice Webster Chinamora found Mr Cocksedge’s claim for repayment of his money in foreign currency by CABS contemptuous of the Government’s policy directive.