Trafigura and IPG give Zimbabwe more time to pay for fuel
The cash-strapped country will now be able to prioritise allocation of scarce dollars to strategic areas
Zimbabwe has reached flexible payment arrangements with some fuel importers that will ensure it stabilises supplies amid a foreign-currency shortage that threatens economic growth.
The government has struck a deal with a unit of Trafigura Beheer and Independent Petroleum Group of Kuwait to extend payment periods for fuel supplies to as many as six months from 30 days, energy minister Joram Gumbo said. This enables the government to prioritise allocation of scarce US dollars to strategic areas, he said.
“We expect the situation to stabilise, but it can’t be overnight,” he said on Friday.
A myriad of economic challenges characterised by shortages of foreign currency, wheat and hospital drugs threatens to derail President Emmerson Mnangagwa’s plans to reverse the country’s two-decade economic crisis triggered by his long-time ally and predecessor, Robert Mugabe. A crippling shortage of dollars, which the nation adopted as its main official currency in 2009, is forcing motorists to queue for hours at filling stations for the commodity.
Zimbabwe needs about $100m monthly for petrol imports and importers have to rely on the central bank for allocations of foreign currency to bring in the commodity. A unit of France’s Total is constantly asking the central bank for hard currency to bring in more supplies, said the fuel company’s MD Ronan Bescond.
Zimbabwe’s fuel consumption has more than doubled to 3.8-million litres daily from about 1.5-million six months ago, while demand for diesel has grown to 4.1-million litres from 2.5-million litres over the same period, according to Gumbo, who said the government didn’t anticipate the spike in demand.