Zimbabwe's central bank governor has blamed the time taken to arrange and execute letter of credit (L/C) transactions for fuel shortages and prices hikes while fuel consumption in the country is 20 per cent less than normal.

The Zimbabwean government is meanwhile wrestling with a crippling currency crisis, which has made L/Cs even harder than usual for importers to obtain.

Fuel shortages

Speaking to a parliamentary committee concerned with fuel shortages, Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, said that the current fuel shortages and price hikes were the result of a "slow-moving and arduous international financing system."

He explained that Zimbabwe's importers use L/Cs issued by local banks to buy fuel but L/C advice and confirmation is provided by foreign banks. Mangudya says this process causes the delays that slow down delivery of fuel to the market.

L/C support

Minister of energy and power development Joram Gumbo meanwhile told the parliamentary committee that the drop in fuel consumption was due to decreased demand on account of higher prices and the halting of illegal fuel exports.

In January the government of Zimbabwe approved an emergency US$400 million credit facility for manufacturing companies so they can continue to import critical raw materials. The facility is being made available via L/C guarantees from RBZ (DC World News, 25 January 2019).

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.