Central bank decision bad for local companies

Businesses are suffering from working cash working capital constraints as a result of the Reserve Bank of Zimbabwe’s (RBZ) harsh decision to withhold companies ‘ outstanding  payments from the now-defunct foreign currency auction system.

The fact that the businesses were required to surrender  the  Zimbabwe dollar equivalent to the central bank up front made the problem worse.

Now, this poses a risk to the businesses’ sustainability.

Dr. John Mushayavanhu, the governor of the Reserve Bank of Zimbabwe (RBZ), has  vowed he will not reverse the decision.
Rather, Dr. Mushayavanhu announced that the central bank would issue Zimbabwe Gold (ZiG) instruments with a two-year maturity and an annual interest rate of 7.5% or non-negotiable certificates of deposit (NNCDs).

According to Mushayavanhu, exporters that  have to surrender the 25% of their export earnings to the Ministry of Finance, Economic Development, and Investment Promotion will also receive a one-year ZiG instrument from the Treasury.

“I’m sorry, but we are not going to budge,” Dr Mushayavanhu said, adding that: “We had to lock the money up. I would rather inconvenience a few comrades than jeopardise the whole economy.”

“So, be it unfulfilled auction rate obligations or those issued by banks and so on, we are hoping to keep them as NNCDs.

“When we talk about confidence in the economy, it is not something that can be legislated. So, we will think about it but definitely not now.”

Companies that are impacted have no other option and are now seriously considering suing the central bank over the issue.

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