African banks lend $985 million to Zimbabwe

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Zimbabwe’s Reserve Bank says it has borrowed $985 million from African banks to purchase fuel and other critical imports with current reserves covering imports for just four weeks, underscoring the severity of dollar shortages.

The southern African nation last month ditched a discredited 1:1-dollar peg for its surrogate bond notes and electronic dollars, merging them into a lower-value transitional currency called the RTGS dollar.

Central Bank Governor John Mangudya said, the bank borrowed $641 million from the African Export and Import Bank, $152 million from Eastern and Southern African Trade and Development Bank, and $25 million from Mozambique’s central bank, among others.

The loans, which would be repaid from future gold earnings, have a tenure of between three and five years and attract an interest of up to 6 percent above the Libor rate, Mangudya said.

Gold is Zimbabwe’s single biggest mineral export earner, accounting for third of its $4.2 billion earnings last year after a record output, central bank data shows.

“These loans are well structured facilities contracted last year. They will be paid from future (gold) export receivables,” Mangudya told a parliamentary committee.

The central bank takes 45 percent of dollar sales from gold producers and half from other miners to fund imports like fuel and power and repay foreign loans.

But the miners only have 30 days to keep their dollar balances in local foreign currency accounts, after which they must sell them. The companies have asked the central bank to extend the period they may keep their dollars to 90 days, according to mining executives.

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