End of tobacco season to worsen forex crisis

End of tobacco season to worsen forex crisis
Published: 03 August 2017
INDUSTRY has expressed fears over an expected worsening of foreign currency shortages in the aftermath of the tobacco selling season, which had mitigated a foreign payments backlog.

The tobacco selling season will officially end in two weeks, with selling already depressed at the floors.

The crop is selling at tobacco auction floors twice a week due to reduced deliveries.

The Confederation of Zimbabwe Industries (CZI) said foreign currency availability was expected to worsen.

"Indeed we fear a tightening with regards liquidity as tobacco is the highest foreign currency earner unless measures are taken," CZI president, Sifelani Jabangwe, told The Financial Gazette.

He said industry had already reduced its projected capacity utilisation targets from 60 percent to 55 percent.

Analysts said importers of raw materials and capital goods should expect difficulties in imports up to February next year when the tobacco selling season for next year opens.

Tobacco is the country's largest foreign currency earner ahead of gold, platinum and other commodities.

Jabangwe said capacitating small scale gold miners could increase gold exports and boost foreign currency earnings.

"We need to reduce non-essential imports and increase the mechanisation of small scale gold producers who are producing about 47 percent of the gold. The small scale producers are mainly using manual methods thus giving them access to jack hammers and generators will help to boost their output. Giving them access to pumps will (also) extend the gold producing period as it is normally affected by underground flooding during the rainy season," said Jabangwe.

Jabangwe said industry was also pinning hopes on the resurging cotton sector to ease foreign currency shortages, although it would require other reinforcements from the central bank.

"The cotton crop, though it's not much, will help to reduce the liquidity crunch as cotton is normally ginned and exported during the period December to January. Thus there is a need to increase the production of the cotton crop in future periods," said Jabangwe.

Jabangwe said another African Export and Import Bank (Afreximbank) loan, which government is seeking, could help improve the foreign currency situation if it finally became available.

"The situation is likely to remain tight but could be alleviated if the government can access the US$500 million loan that they indicated they were sourcing (from Afreximbank)," he said.

Cash shortages have continued to worsen as over US$1 billion was allegedly externalised between 2009 and 2015.

Government borrowing has also worsened the situation as it had failed to repay debts in foreign currency as sourced from banks.

It has been repaying debts using real time gross settlement, which has become a form of money printing.
- fingaz
Tags: Forex,

Comments

Latest News

Latest Published Reports

Latest jobs