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Zim revels in Afreximbank’s shock absorber

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Forex-starved Zimbabwe is toasting to the Afreximbank’s US$4bn facility meant for eligible countries and companies to mitigate the impacts of the Russia-Ukraine war saying the kitty is welcome amid global supply challenges.

Last month, the Afreximbank’s board of directors approved the US$4bn Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA) to cushion the bank’s members against economic headwinds following Russia’s invasion of Ukraine on February 24 under a “special operation”.

In Zimbabwe, prices of fuel, bread, gas, fertiliser and cooking oil have gone up in response to global shortages triggered by the war amid fears this will cause imported inflation.

Zimbabwe Fertiliser Company MD Richard Dafana told Business Times that while the modalities have not been availed, they welcomed the initiative and “keenly await the fine details so that we see how best to benefit from it”.

“…any facility that aims to mitigate the negative effects of price increases and enables us to source raw materials from alternative markets to Russia and Ukraine is very welcome and a timely boost to the local fertiliser industry. We welcome the initiative and keenly await the fine details so that we see how best to benefit from it,” Dafana said.

Oil expressers import edible oil from Eastern Europe and the prices have gone up on the international market amid global supply challenges.

This has raised fears of cooking oil shortages on the local market.

The situation for local oil expressers has been compounded by foreign currency shortages as a result of allotments from the auction system.

Industry is getting about US$500 000 per week since 2020 at a time edible oil prices have gone up 111% to US$2000 per tonne from US$950.

“It [the Afreximbank’s facility] will go a long way in ameliorating supply constraints in edible oils, stock feeds and soap raw materials but more importantly agricultural inputs for summer cropping,” said Busisa Moyo, Oil Expressers Association of Zimbabwe president.

Central bank chief John Mangudya told Business Times that the facility will go a long way in helping local companies to ramp up production.

“We are still studying the facility and we shall give full information after our experts have completed the analysis of the package but it is a welcome development for most of  the local companies that need that timely boost kitty from  Afreximbank,” Mangudya said.

The facility comes as local firms have been battling to secure forex from the foreign currency auction system.

The situation has also been worsened by the reluctance by foreign banks to honour letters of credit due to Zimbabwe’s perceived country risk.

This has seen LCs, which are issued in place of cash payments, being confirmed after four months, captains of industry have complained.

Grain Millers Association of Zimbabwe chairman Tafadzwa Musarara said his constituency was still studying the facility and would respond after next week.

Last week, Musarara said the subsisting global food inflation crisis was causing “serious headwinds” and Zimbabwe was not spared.

The UKAFPA programme seeks to do Import Re-Order Cost Adjustment Financing to help countries to meet immediate import price increases pending domestic demand adjustments.

It will also cover Oil and Metals Buy-Back Financing to refinance over-collateralised loans in the context of the current high oil and metal prices, and thereby release more free cash flow for use in meeting other urgent needs, for examples food and fertiliser imports and servicing rising cost of debt.

The facility will also provide Commodity Export Revenue Stabilisation to help countries and companies to structure and enter derivative contracts at today’s high commodity prices and stabilise future export earnings

A tourism revenue deficit financing will be extended to Central Banks of tourism dependent economies to cover foreign exchange revenue shortfalls arising from a decline in tourism arrivals from Russia and Ukraine.

A National Export Revenue Acceleration Facility will be used to accelerate the completion of impactful export-oriented projects by expediting access to foreign currency for use in importing critical equipment, technology, and expertise, for project completion.

Experts said such a window could be tapped by Zimbabwe to boost gold output and capitalise on the booming prices on the international market triggered by the conflict in Eastern Europe.

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