Giveaway terms for $18bn bailout

Source: Giveaway terms for $18bn bailout | Sunday Mail (Business)

Business Reporter

Government is breathing a new lease of life into the economy after announcing concessionary terms for the $18 billion Covid-19 economic recovery and stimulus package.

Beneficiaries of the bailout will have a three-month grace period for servicing the loans.

Detailing the modalities for disbursement, terms and conditions as well as criteria for eligibility for the fund on Friday, Finance and Economic Development Minister Mthuli Ncube said the bulk of the funds will be channelled to productive sectors of the economy.

The package is meant to stimulate the economy and prevent widespread job losses that could result from the coronavirus pandemic.

Governments across the world have been forced to come up with packages to jumpstart economies affected by the disease.

About $10,6 billion has been reserved for productive sectors, while $3,4 billion has been earmarked for budget reallocation, $2 billion for banks liquidity support, $1,5 billion for broad relief measures, $2 billion for RBZ’s lender of last resort, $500 million for tourism support and lastly $200 million for the arts and sports sector.

Funds for productive sectors are expected to be sunk in agriculture, working capital, mining and tourism sectors, all of which will be accessed through normal banking channels.

“Other than capital grants, which are being disbursed through line ministries, all productive sector support will be financed by banks through normal banking channels with Government providing requisite guarantees to the financial institutions through risk sharing model,” said Minister Ncube.

Interest rates for the facilities will be capped at 20 percent.

Banks will be required to conduct credit assessments and due diligence on bailout loan applicants, as well as monitor and evaluate the borrowers’ usage of funds to ensure that the beneficiaries repay the loans.

Borrowers are expected to have tax clearance certificates from the Zimbabwe Revenue Authority, be tax compliant and have valid compliance certificate from National Social Security Authority (NSSA).

Also, borrowers must be registered with Zimbabwe Tourism Authority (ZTA) to benefit under the Tourism Sector Support Fund.

Companies that have a record of defaulting under previous facilities or require funds for real estate, equities, illegal and speculative activities are not eligible to borrow.

Minister Ncube said the implementation of the recovery and stimulus measures had already commenced with the disbursement of the $2,5 billion to productive activities that include the winter wheat programme. Government will also capitalise Empower Bank, Women’s Microfinance Bank, Small and Medium Enterprise Development Cooperation and the Post Office Savings Bank.

Government has already reduced import duty on Covid-19-related imports, while duty on critical raw materials had been relaxed from April 1 to December 31, 2020 to lower the cost of production and imported inflation.

Economist and member of the Reserve Bank of Zimbabwe (RBZ) monetary policy committee Eddie Cross said the effectiveness of the economic recovery and stimulus measures will depend on how the funds will be deployed.

“The problem is going to be how to spend it because the mechanism of getting it to the market, the entrepreneurs is very difficult. If you easily give that money away, it will not make an impact. How to get it to the right place to actually get the right people to start producing properly is very difficult,” he said.

It was critical, he added, that deserving firms pegged back by Covid-19 — which saw President Mnangagwa proclaim national lockdown from March 30, 2020 in order to contain and stop its spread — benefit from the bailout funds.

He said the interest rate was “a giveaway”.

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