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Zimbabwe central bank forex directive to hit miners hard

The central bank’s latest bid to deal with foreign currency shortages will hit hard Zimbabwe’s verdant mining sector, and has been described as ‘catastrophic’ by some industry players.

“With immediate effect, 80 percent of all foreign exchange receipts from Platinum Group Metals (PGM) and Chrome shall be transferred to the Reserve Bank Nostro Account on receipt,” reads a central bank directive dated August 8.

Previously, the miners were allowed to retain 50 percent of their foreign earnings, but the RBZ says its move will “ensure effective administration of foreign exchange, as well as spread liquidity to guarantee equity in the foreign exchange market”.

In return for their foreign currency the central bank will credit the miner’s local accounts using the Real Time Gross Settlement System (RTGS).

This has alarmed mining players, given the government’s abuse of the system.

Finance Minister Patrick Chinamasa said in his 2016 budget review that government had issued Treasury Bills amounting to $2.1 billion last year alone to honour $1.7 billion legacy debt and to finance the previous year’s $356 million budget deficit.

In April, Chinamasa said the government had issued Treasury Bills totalling $4.417 billion since 2014.

There has been no Foreign Direct Investment (FDI) fillip to inject some cash into the economy.

The country remains an FDI leper in the region, attracting $294.66 million in 2016 from $421.2 million in the previous year, reflecting worsening investor sentiment.

By contrast, Zambia attracted investments of $1.8 billion in the first half of 2016, according to the Zambia Development Agency.

With falling tax revenues and little access to concessional lines of credit from international lenders, the cash strapped southern African nation has resorted to issuing Treasury Bills to finance its operations.

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