Bill to expunge legacy debts on cards

Payment of legacy debts could take a bit longer depending on the route affected parties would have chosen to have the debts expunged, Business Weekly has learnt.

Legacy debts are cash flows generated in Zimbabwe by foreign entities that could not be repatriated to foreign suppliers due to foreign exchange shortages.

These legacy foreign debts, which were assumed by the central bank according to Circular 8 of 2019, covers the period between January 2016 and February 2019.

Last year, the central bank called on all those whose blocked funds were approved to transfer the respective local currency to the RBZ by April 30, 2020 through normal banking channels.

“In order to ensure that companies comply with the April 30, 2020 deadline approved by respective regulatory authorities for the finalisation of their audited financial statements, and given the constrained working arrangements as a result of the Covid-19 pandemic, all blocked funds appeals that meet the laid down criteria but are not received by April 30, 2020 will be considered null and void,” read part of the statement issued by the RBZ in April 2020.

Transfer of the said local currency to the central bank, at 1:1 with the foreign obligations, will “facilitate closure of the processing of applications under the Blocked Funds Framework”, the RBZ said.

Following the completion of legacy debt validation processes, the central bank had started paying out some of the debts. There were also plans to issue debt instruments to the affected parties.

To date, the apex bank has reportedly paid US$460 million, according to the Zimbabwe National Chamber of Commerce in a feedback report to its members, following a meeting with RBZ governor Dr John Mangudya.

Those with outstanding legacy debts have several options to have them expunged.

According to the ZNCC’s report back, the central bank is putting in place a blocked funds Bill to cover legal aspects of legacy debts before clearing them.

“A committee has been put in place and is going to meet and map the way forward,” Dr Mangudya is reported to have said.

He reportedly added that time frame on honouring legacy debt is depended on the legislation process, which is about to kick-off.

He, however, said there is need to look at the magnitude of the legacy debt given the other needs for the foreign currency.

Apart from waiting for the Bill to be put in place, affected parties can also choose to domesticate the blocked funds.

“We are also domesticating debts so that those with domesticated debts can access forex on the auction – we are doing this simultaneously with the process of coming up with the bill,” Dr Mangudya is quoted to have said.

ZNCC representative in the meeting, however, objected to the proposal to have a blocked funds Bill as there are already too many laws to regulate the investment climate, which weigh down on business confidence.

The business and commerce representative body indicated that it does not agree to the blocked funds bill and pushed for it to be presented to affected stakeholders first before it is road railed to Parliament.-ebusinessweeklyc.oz.w