The Reserve Bank of Zimbabwe failed to honour a foreign debt it assumed from the largest manufacturer and marketer of food products, National Foods, the Zimbabwe Stock Exchange-listed entity has revealed.
National Foods among other local millers has been struggling to import adequate supplies of wheat resulting in shortages of flour, and consequently bread.
Foreign currency support required to deliver product in a controlled framework, has been inconsistent and well short of required levels; and this meant that credit limits were quickly breached with foreign wheat creditors, giving rise to stop-supply situation for imported wheat.
In an effort to avert crippling shortages and remain in business the milling company entered into an agreement with the RBZ where the latter would assume its legacy debt to suppliers.
The foreign debt was, however, supposed to be paid timeously to enable National Foods to continue receiving wheat supplies, but unfortunately the RBZ failed to honour its promise during the agreed period.
According to National Foods, an agreement was reached between the RBZ and the group’s major grain supplier wherein the RBZ assumed the group’s legacy debt to its supplier amounting to US$54,9 million as part of a funding agreement, which would see this debt being settled over an agreed period.
In turn, National Foods settled the full amount locally to the RBZ, resulting in a reduction in its creditors.
However, as part of the agreed terms, timely settlement of the legacy wheat position, amounting to $54,9 million, was critical to enable the continued and consistent supply of imported wheat into the country.
“Regrettably, shortly after the period end the RBZ has had to delay payments on the facility, which in turn has disrupted flour supplies to the market,” said National Foods.
“The group continues to work closely with the RBZ to resolve the matter and remains fully capacitated to produce adequate volumes of flour provided the necessary foreign currency to import wheat is availed,” National Foods said.
The RBZ has, however, since put in place measures that are meant to improve the availability of foreign currency going into the future.
In its 2019 Monetary Policy Statement, the RBZ introduced policies aimed at establishing a trading mechanism of RTGS balances and bond notes with international currencies through establishing an inter-bank foreign exchange market to restore domestic competitiveness and promote growth.
Among other things, the measures are also “meant to preserve foreign currency for external payments purposes that include importation of goods and services, foreign dividend payments, business and personal travel and servicing of country’s external obligations.”
However, while importers will now have to turn to the inter-bank foreign exchange market to access foreign currency, the needs of wheat importers shall be met through Letters of Credit facilities and support by Foreign Exchange Allocation Committee.
Other strategic imports that will also access foreign currency through Letters of Credit facilities and support by Foreign Exchange Allocation Committee, include fuel, electricity, water chemicals, medicines, and cooking oil.