March 26, 2020 / 5:15 PM / 2 days ago

UPDATE 2-Zimbabwe cuts rates, miners send coronavirus distress signals

(Adds miners on effects of coronavirus)

By MacDonald Dzirutwe

HARARE, March 26 (Reuters) - Zimbabwe’s central bank cut its main lending rate to 25% on Thursday and set a fixed exchange rate as part of measures to support the economy against the coronavirus pandemic.

The Chamber of Mines, which represents major mining companies in the country, said mineral production could fall 60% in the second quarter due to the impact of coronavirus, hurting a country that heavily relies on the sector for scarce dollars.

John Mangudya, the central bank’s governor, said in a statement that the bank’s monetary policy committee had decided to cut the main lending rate from 35% and expected banks to cut lending rates to customers affected by the coronavirus.

“The government, through the bank, has suspended the managed floating exchange rate system to provide for greater certainty in the pricing of goods and services in the economy,” Mangudya added.

The rate was fixed at 25 Zimbabwe dollars to the U.S. dollar, the same rate as on the official interbank market. On the black market, rates softened to 40 to the dollar from a high of 45 at the start of the week.

Mangudya said Zimbabweans with access to foreign currency could now use their money for domestic transactions after the country ended dollarisation in June last year. Banks had agreed to reduce charges on electronic payments for now, he said.

But the Chamber of Mines warned that a three-week lockdown planned in South Africa from Thursday dud to the coronavirus would hurt platinum and nickel producers due to “logistical complications” in transporting minerals to that country.

Zimbabwe sells unprocessed platinum and nickel to South African refineries as well as gold to Rand Refineries, which said on Thursday it would shut its smelter and significantly scale down its refining during South Africa’s lockdown.

“It is estimated that mineral production for the second quarter of 2020 may decline by about 60% compared to the first quarter, with revenue losses exceeding $400 million,” the mining chamber said in a note to members.

The Chamber of Mines said Zimbabwe’s ferrochrome producers were already feeling the effects of coronavirus epidemic, with the country’s largest producer Zimasco going into care and maintenance on Wednesday due to falling prices of the mineral.

Zimasco is owned by China’s Sino Steel Corporation. Miners said they had asked the government to waiver payroll tax, allow the companies to settle tax obligations in local currency and extend a royalty tax holiday during the second quarter of the year.

Zimbabwe has officially recorded three cases of coronavirus and one death, but the opposition and critics of President Emmerson Mnangagwa accuse his government of under-reporting the number of cases. The government denies the charge. (Reporting by MacDonald Dzirutwe; Editing by Olivia Kumwenda-Mtambo, Timothy Heritage and Alex Richardson)

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