HARARE – Zimbabwe’s current import cover is at a critical level, with the treasury chief saying it is unacceptable considering that the southern African nation’s forex is oversubscribed.
Experts say that the southern nation needs to cut its expenditure, support export oriented companies by removing the retention ratios to make the interbank market viable and above all have a functional currency.
The southern African country is still recovering from the shocks of cyclone Idai and El-Nino induced drought which characterised the 2018/19 cropping season resulting in crop failure, livestock and wildlife budgets. However, this is has put pressure on the fiscus.
Despite the country may have collected more than it had budgeted, the exchange rate and inflation pressures eroded the real value of the funds affecting budget implementation. But the treasury remains optimistic that inflation will decline by end.
“In responding to suggestions that royalties be paid in local currency and that foreign currency retention be reviewed, I urge Honourable Members to consider that Zimbabwe needs to accumulate foreign currency reserves,” Ncube said, while responding to issues raised by parliamentarians at a pre-budget seminar recently.
Ideally, the country should sufficiently have import cover of at least 6 months. The country has set an ambitious target of attaining US$12 billion by 2023 in potential revenue from the mining industry.
“Our current reserve levels are nowhere near enough and this is unacceptable and explains some of the foreign debts and balance of payments challenges we face. These requests should, therefore, balance the desire to increase investments and national strategic interests, especially on matters involving depleting natural resources.”
Previously, retention thresholds of foreign currency for mining firms were increased from 30% to 55% to ensure viability of operations in the sector. But, Ncube said the southern African nation will continue to monitor the situation, including developments on the international commodity markets, with a view of engaging mining houses on any further required support to guarantee sustained viability of mining houses.
The forex surrendered is used for procurement of critical imports such as medication, fuel, grain and settling letters of credit, among others. This is against the background of inadequate foreign currency on the market, which if government does not intervene through implementing surrender requirements, critical products would be in short supply.
In order to harness the full potential of the mining sector, the treasury will give full support to the mining sector during 2020. This will include capacitation of Provincial offices of the Ministry of Mines to become more efficient in discharge of their duties.
Of the 8 bids submitted so far by line ministries: indicate resources requirements of ZWL$112 billion, which far exceed the total resource envelope for 2020 Budget.
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