Cheaper long-term loans to support productive sectors
Senior Business Journalist
THE government is ready to facilitate significantly low interest rates and long durations on all the financing facilities that the Treasury will put in place to support the various productive sectors of the economy.
The Minister of Finance and Economic Development, Professor Mthuli Ncube said this while answering questions from the audience at the end of the Confederation of Zimbabwe Industries (CZI) three-day annual conference which ended on Friday at Harare.
The financing facilities include the $15 million industry support fund to be introduced by the government, which would come from the special drawing rights funds that Zimbabwe has received from the International Monetary Fund (IMF).
Last year, the IMF allocated Zimbabwe $958 million as part of a general allocation of $650 billion that was disbursed globally to member countries of the multilateral institution.
Professor Ncube recently launched a $30 million SDR-backed horticulture export revolving fund that is expected to close the financing gap for growers, boost productivity and significantly help entities with a bias towards value addition .
Through resources such as SDRs, the Treasury targets strategic sectors such as horticulture expansion and value addition.
“And you ask about support for the industry in terms of lower interest rates and longer term financing.
“I’m listening, what I’m going to do is engage the banks that are on this retooling fund and see how much they can extend the terms of the loans and also what interest rate we could peg them, which will actually be lower than the marketing rate.
“So I’m going to actually do that with all the facilities that we put in place as a government,” he said.
Professor Ncube said the SDR disbursement of $145m will be channeled to a number of priority sectors including investments in social sectors (health ($35m and education ($10m). ); support to agriculture (30 million dollars) and smallholder farmers). irrigation systems (20 million dollars), support to industry (re-equipment), development of infrastructure (housing development, 10 million dollars) and gold centers ($10 million).
One of the major challenges preventing local industry from ramping up production to optimal levels is the much needed funding for retooling and sourcing critical raw materials.
Professor Ncube said the government would also consider protecting the agricultural sector, fearing that the sector would also face undue competition from some imports flooding the local market.
“On agricultural imports, you would basically want to be protected as a local producer on some of the agricultural raw materials.
“If there is a local producer capable of producing the same product, why import this product?
“As a government, we should think carefully about protecting local industry because we are ultimately protecting jobs.
“I totally agree with that and will engage the Minister of Agriculture to see which areas we should close,” Minister Ncube said.
The agricultural sector is one of the main economic pillars contributing to gross domestic product and tax through job creation and foreign exchange generation, among other fundamentals.
On why the Reserve Bank of Zimbabwe was allocating foreign exchange when the country had so many commercial banks, Professor Ncube said: “Our banking sector is dual in nature in that we have mainly banks owned by local interests, then to foreign interests. banks, and the two groups do not trade with each other, neither for domestic monetary purposes in terms of settling their positions overnight, nor for foreign currency purposes in terms of pricing our exchange rate or the value of money.
“So because of this problem, we find that the Central Bank then has to play an interdependent role.
“For example, if one of the foreign banks is long overnight and a domestic bank is short, the Central Bank will use zero percent NCDs (negotiable certificates of deposit) to mop up that excess liquidity from the bank. and literally switch to the local bank overnight,” Prof Ncube said.