Credit facilities under-utilised

constraints the country is facing.
The budget statement announced by Finance Minister Tendai Biti earlier this week shows that US$12,5 million has so far been disbursed out of the US$70 million Zimbabwe Economic Trade Revival Facility (ZETREF) facility.

This is out of a possible US$25 million under the first phase of the facility. Four banks were selected for the initial payouts: BancABC (US$5 million), NMB (US$5 million), TN Banking Corporation (US$5 million) and FBC Banking Corporation (US$10 million).

However, only FBC Bank and NMB Bank have submitted projects for funding, resulting in the disbursement of US$12,8 million to various sectors and regions of the country.
At the same time, disbursements from approved lines of credit of around US$1,6 billion between January and June this year amounted to US$613,9 million.

The minister attributed the low uptake of lines of credit to a number of factors including capacity issues, protracted approval processes by the lenders and the delays in fulfilling the conditions precedent by the local banks.

He also indicated instances where the processes have taken over 12 months to finalise, notwithstanding the facilities having been announced as readily available to the country.
Meanwhile, the telecommunications sector received the bulk of the disbursed funds at US$259,9 million, representing 42,3 percent of the total.

Agriculture followed with US$172,8 million (28,1 percent) and mining receiving US$88 million (14,3 percent).

The manufacturing sector – which most critically requires affordable funding – received US$52,7 million (8,5 percent), with the financial and distribution sectors getting US$20,3 million (3,3 percent) and US$20 million (3 percent), respectively.

The tourism sector, which is also considered important for Gross Domestic Product growth, received nothing.
Since dollarisation local firms have had limited funding options, notably costly short-term borrowing, and the liquidity crunch has been worsened by the fact that the Government now has limited tools to control the monetary situation.
For instance, the Reserve Bank of Zimbabwe can no longer print money, the exchange rate is determined externally and the central bank also now has little control over interest rates and money supply.