African Development Bank (AfDB) has announced that it will pump USD 50 Mn in loans into Zimbabwe’s private sector in 2019.
Zimbabwe was plunged into its worst economic crisis which was fueled by mismanagement, over-spending, debt accumulation and corruption over decades. The situation got dire last year to an extent basic and vital commodities became scarce. Motorists in the country’s capital were forced to spend a night in their cars in queues outside petrol stations, supermarkets even began to ration purchases and chemists were unable to provide some basic medicines. As a result, the prices of commodities skyrocketed.
Local industries had a tough time importing raw materials as well as expand operations due to severe shortage of hard currency. Over 50 companies have reportedly closed shops this year and the ones surviving may be forced to dwindle down their operations due to the tough economic times.
For a long time, Zimbabwe had been denied access to international credit after it defaulted on its debts to global lenders and run up arrears of nearly USD 6 Bn. The economic volatility of the Emmerson Mnangagwa-led country also kept away regional and international investors.
The country is yet to settle its USD 600 Mn debt to the regional lender, this is according to Zimbabwe Independent.
AFDB’s USD 50 Mn injection into the debt-stricken country comes after the finance house extended USD 25 Mn last year to support local industries to upgrade and expand operations.
Country Manager of AfDB Zimbabwe spoke to the Independent and revealed that funds would soon be disbursed to promising firms with practicable projects from the USD 50 Mn and it will be channeled towards supporting the private sector.
“Last year, we extended a USD 25 Mn credit line to the Central African Building Society (CABS) which they on-lend to the agriculture sector and manufacturing firms for importation of inputs and machinery and, in particular, to export-oriented activities which the bank believes will help the country to earn the much-needed foreign currency.”
“There are various lines of credit AfDB is considering for the Zimbabwe private sector up to a limit of USD 50 Mn this year.” Kitabire stated adding that the bank was prioritising on agriculture and the manufacturing sector.
Under the loan facility, companies with wordkable projects and capacity to produce and export will be considered first. Kitabire says the loan disbursement will begin soon. “Disbursements will occur soon after appraisals and satisfying necessary conditions and signing of agreements.”
Earlier, Kitabire disclosed that AfDB would channel USD 223 Mn in grants to Zimbabwe’s private sector over the next three years. The firm however maintained that the public sector lending would resume once Zimbabwe has cleared paying its debt.
It has been estimated that Zimbabwe requires in excess of USD 10 Bn for it to achieve total recovery. The troubled remains securing these credits owed to the fact that the country has low credit worthiness and policy inconsistency.
Despite the myriad of financial-related challenges facing Zimbabwe, AfDB has not frozen lines of credit to the country’s distressed industries.
Featured Image Courtesy: Africainvestor.com
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