Zimbabwe plans new currency as dollar shortage bites: Finance minister

A petrol attendant counts local bonds notes and coins received from a motorist in Harare, Zimbabwe, November 22, 2018. (REUTERS)
Updated 13 January 2019
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Zimbabwe plans new currency as dollar shortage bites: Finance minister

  • The price of petrol had increased to $3.31 per liter from $1.32 from midnight but there would be no increase for foreign embassies and tourists paying in cash US dollars

HARARE: Zimbabwe will introduce a new currency in the next 12 months, the finance minister said, as a shortage of US dollars has plunged the financial system into disarray and forced businesses to close.
In the past two months, the southern African nation has suffered acute shortages of imported goods, including fuel whose price was increased by 150 percent on Saturday.
Zimbabwe abandoned its own currency in 2009 after it was wrecked by hyperinflation and adopted the greenback and other currencies, such as sterling and the South African rand.
But there is not enough hard currency in the country to back up the $10 billion of electronic funds trapped in local bank accounts, prompting demands from businesses and civil servants for cash which can be deposited and used to make payments.
Finance Minister Mthuli Ncube told a townhall meeting on Friday a new local currency would be introduced in less than 12 months.
“On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years,” he said.
Zimbabwe’s foreign reserves now provide less than two weeks cover for imports, central bank data show. The government has previously said it would only consider launching a new currency if it had at least six months of reserves.
Locals are haunted by memories of the Zimbabwean dollar, which became worthless as inflation spiralled to reach 500 billion percent in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.
A surrogate bond note currency introduced in 2016 to stem dollar shortages has also collapsed in value.
President Emmerson Mnangagwa is under pressure to revive the economy but dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.
Mnangagwa told reporters on Saturday that the price of petrol had increased to $3.31 per liter from $1.32 from midnight but there would be no increase for foreign embassies and tourists paying in cash US dollars.
Locals can pay via local debit cards, mobile phone payments and a surrogate bond note currency.
With less than $400 million in actual cash in Zimbabwe according to central bank figures, fuel shortages have worsened and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium of up to 370 percent.
The Confederation of Zimbabwe Industries has warned some of its members could stop operating at the end of the month due to the dollar crunch.
Cooking oil and soap maker Olivine Industries said on Saturday it had suspended production and put workers on indefinite leave because it owed foreign suppliers $11 million.
A local associate of global brewing giant Anheuser-Busch Inbev said this week it would invest more than $120 million of dividends and fees trapped in Zimbabwe into the central bank’s savings bonds.


Saudi Arabia real estate reform ‘on the right track,’ housing minister tells conference

Updated 48 min 40 sec ago
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Saudi Arabia real estate reform ‘on the right track,’ housing minister tells conference

  • Financial Sector Conference is designed to showcase Saudi Arabia’s finance industry to a world audience
  • The most eye-catching was a plan by the Saudi Real Estate Refinance Company (SRC)

RIYADH: Saudi Arabia’s real estate finance sector — crucial to the ambition of a home-owning economy under the Vision 2030 strategy — is maturing rapidly, a high-profile event in Riyadh heard on Wednesday.
“We’re on the right track,” housing minister Majid Al-Hogail told attendees on the first day of the Financial Sector Conference, designed to showcase Saudi Arabia’s finance industry to a world audience.
His comments came as financial institutions in the Kingdom announced a raft of measures to encourage more home ownership.
The most eye-catching was a plan by the Saudi Real Estate Refinance Company (SRC) — owned by the Public Investment Fund — to issue up to SR3.75 billion ($1 billion) worth of sukuk, or Islamic bonds, this year to finance home ownership plans.
Fabrice Susini, chief executive of the company, said SRC had spent SR1.2 billion buying mortgages from local mortgage finance companies and adding liquidity to these firms. SRC is often compared to US home finance group Fannie Mae.
Reform of the financial infrastructure of the property market is regarded as crucial to Saudi Arabia’s Vision 2030 reform plans, to ensure an ownership rate of 70 percent in the privately owned housing market by 2030.
In a panel entitled “Mortgages: Bolstering Industry Appetite,” Al-Hogail spoke of the unique position Saudi Arabia has in the housing market, highlighting the relevance of a database established by the Ministry of Housing to give a better and deeper understanding of the market. The diverse nature of the market presents its own challenges, he said.
“Every city has its own different set of challenges and we can’t generalize. With the establishment of the database, it provides the ministry with a better future outlook through more detailed information, obtained through various means — whether it were through the Electric Company, through the Ministry of Municipal and Rural Affairs, or through the General Authority for Statistics and their surveys.”
“Over 16 government agencies support the housing sector to achieve Saudi Vision objectives, to increase property ownership among Saudis to 70 percent by 2030,” he said.
An official report for the first quarter of 2019 revealed that the finance market reached SR5.6 billion last March. Some 12,800 citizens received loans, and 85 percent were subsidised.
Saudi Arabia last year announced plans to boost the size of the mortgage market to SR502 billion by 2020 as part of a comprehensive plan to provide housing finance to its citizens, facilitating a balanced and sustainable housing environment through the establishment and development programs.
In other deals, Bidaya Home Finance announced three initiatives to enhance the Saudi market. Its first initiative involved the sale of Bidaya’s mortgage portfolio to SRC, valued at SR500 million over a period of six months. SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview. “Our strategy is clearly to tap the market twice this year,” he said.
“We are really looking at probably issuing something between SR2 to 4 billion that we may be issuing in two tranches.”
He said SRC was looking at sukuk in the 10- to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said. He added that the company was assessing whether it could also issue bonds in currencies other than the Saudi riyal.
In March, SRC completed a SR750 million sukuk issue with multiple tenors, under a program that allows it to issue up to SR11 billion of local currency denominated Islamic bonds.