BY TATIRA ZWINOIRA
RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya said this week about US$50 million had been channelled into servicing foreign airlines’ funds trapped in the country due to acute hard currency shortages.
The central bank assumed the debt three years ago after the government ended a decade-long multi-currency regime and re-introduced the Zimbabwean dollar as the medium of exchange for domestic transactions. Funds due to foreign airlines were part of a combined US$2 billion in blocked funds belonging to companies, which the government undertook to settle.
The foreign currency crisis started in 2016.
In November that year, the government attempted to calm the markets by introducing bond notes, which have recently been depreciating by big margins against the greenback.
International Air Transport Association (IATA) data shows that as at July 2019 foreign airlines were struggling to repatriate up to US$196 million from Harare.
In an interview with businessdigest this week, Mangudya said the US$50 million was part of a broad range of settlements to companies and other organisations by the central bank.
He said settling debts was imperative for Zimbabwe, which has been struggling to access international lines of credit after defaulting on several commitments.
“That figure (airlines debt) should have gone down by more than US$50 million in aggregate,” Mangudya told businessdigest.
“We are a very responsible government and a responsible bank. We cannot wish away our obligation or the in-country funds, so we need to ensure that if we say ‘Zimbabwe is Open for Business’, we are also open to paying our commitments.
“If you look at the reports of private entities, you will see that they are reporting that their blocked funds have been paid. So definitely, we are paying and it’s not just IATA,” he said.
The RBZ undertook to settle the airlines debts following a series of meetings between IATA and President Emmerson Mnangagwa’s government, which came into office in November 2017.
IATA managed to talk the government into coming up with a settlement roadmap in order to save airlines.
Mangudya said Zimbabwe had put in place a system whereby funds due to airlines are released as soon as transactions are made, to avoid fresh backlogs.
“Going forward, we do not expect such things to happen again because they are now being paid as and when the transactions are being made so there will be no more lag between payments to the airlines,” he said. “We have seen improvements. When you buy a ticket using your foreign currency account or free funds the money goes straight into the account of the airline.
“But, before, because we had a mixed bag of currencies involving ‘virtual currency’ in Zimbabwe, in other words, unfunded currency or balances, if I could put it that way, those transactions were not backed.
“However, right now, because we do not have those virtual currencies in the market, they (tickets from airlines) are now all backed and funded.”
There are several foreign airlines that are flying into Zimbabwe, which include Ethiopian Airways, British Airways (through Comair Limited), South African Airways, Emirates, Kenya Airways, RwandAir and, more recently, Qatar Airways.
Permanent secretary in the Ministry of Transport Theodius Chinyanga confirmed this week that airlines had said they were happy with the repayments.
“The airlines are satisfied with the manner that the settlement is being dealt with. Every airline is getting its money when they charge tickets,” Chinyanga said.
“They are getting their money and there is no Reserve Bank in there and they are charging in foreign currency so those airlines coming in now will never be affected. They have been allowed to retain their money and repatriate it and that is statutory.”