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Business Reporter
The Government has announced that it will issue State guarantees for its loans, private loans, and bonds issued by some financial institutions to support various economic activities in Zimbabwe.
According to a Government gazette issued by Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube last week, the Government issued a guarantee and surety for agro-bills worth US$20 million and $8,5 billion floated by AFC Holdings.
This means that if AFC defaults on its contractual obligations to the subscribers of the agro-bills, the Government would be responsible for repaying the debt.
The purpose of the agro-bills was to finance the 2023 winter wheat agricultural activities and the guarantee will remain valid and in force until April 30, next year.
Minister Ncube also issued a sovereign guarantee in respect of a loan facility to the Government from the International Fund for Agricultural Development (IFAD) for the Horticulture Enterprise Enhancement Project (HEEP).
The US$37,1 million loan had a tenure of 40 years from the date of approval.
It was meant to support horticultural production and marketing by smallholder farmers and micro small and medium enterprises engaged in horticulture value chains.
The loan is granted on highly concessional terms and shall be free of interest but bear a fixed service charge as determined by the IFAD from the date of approval.
Two guarantees were issued in respect of $1,7 billion Infrastructure-Dollar Linked Bonds by the Infrastructure Development Bank of Zimbabwe (IDBZ) meant to finance the servicing of a housing project in Bulawayo. The use of dollar-linked bonds helps to protect investors from inflation.
In addition to the sovereign guarantees issued to the IFAD, IDBZ and AFC, Minister Ncube also issued five Cash Covered Government Guarantees backed by the Special Drawing Rights (SDRs) to CBZ Bank Limited and NBM Bank Limited in respect of loans amounting to US$2,1 million meant to support horticultural activities.
The cash-covered state guarantees shall remain until the debts are fully serviced.
The facilities for the horticultural industry are meant for the production and export of chill, sugar snap (peas), and flowers.
The Government launched the Horticulture Export Revolving Fund in 2022 to support the growth and development of the horticulture sector.
It is intended to provide farmers with access to affordable financing to boost production and exports.
The US$30 million Horticulture Export Revolving Fund is part of the US$961 million Zimbabwe received in Special Drawing Rights from the International Monetary Fund in 2021.
The issuance of the cash cover guarantees came after horticulture players had raised concerns after they decided to replace it with a government guarantee alone.
This curtailed banks’ ability to extend credit to farmers, according to the Horticultural Development Council.
The 80 percent cash cover is seen as positive by banks, as it reduces their risk.
Zimbabwe is a major supplier of horticultural products to the Netherlands, the United Kingdom, South Africa, Germany, Hong Kong, Portugal, France, China, Norway, Poland, and Spain, according to Zimtrade.
Online Reporter