RBZ backs down on exporters' free funds

THE central bank has made a raft of major reforms to stabilise the foreign exchange market, including immediately scrapping the much-loathed compulsory requirement to liquidate unutilised export proceeds within 60 days.

This came after industry raised concerns over the compulsory liquidation of unutilised funds into the weakening and unstable local currency in 60 days, saying it erodes value.

The move is also largely seen as a positive on the country's ease of doing business scorecard, especially coming on the heels of a Finance ministry directive to tax business in the respective currency of transaction.

In a statement outlining the January 7 Monetary Policy Committee (MPC) meeting, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said the measures were meant "to refine and enhance the sustainability of the foreign exchange auction system".

The interbank auction system brought stability to the exchange rate which had been on a slippery slope, making it difficult for business and individuals to plan or transact, forcing many to resort to the United States dollar.

Mangudya said the meeting, however, resolved to increase the export surrender requirement from 30% to 40% on all export receipts, with immediate effect.

He also said the MPC resolved to maintain the liquidation requirement for domestic foreign exchange sales at 20% net of sales tax, with authorised dealers required to remit funds to the bank in the currency of receipt as well as to ensure that the allotment of foreign currency on the foreign exchange auction and interbank market continues to be guided by the priority list which places productive imports such as raw materials, consumables and capital goods ahead of foreign exchange requirements for services, education and portfolio investment.

The MPC also made interventions to enhance the role of bureaux de change in the foreign exchange market, including reducing the portion of balances to be sold on the foreign exchange auction by bureaux de change from 80% to 40% in line with the export surrender requirement for exporters.

The maximum allowable margin on small transactions to be charged by bureaux de change was also increased from 5% to 8% while the daily maximum limit per transaction was revised to US$2 000 at bureaux de change level to cater for foreign exchange requirements for individuals, micro and small to medium enterprises in accordance with the foreign currency priority list.

The committee also affirmed that bureaux de change are now allowed to purchase foreign currency from individuals and companies without limit
subject to know-your-customer principles and anti-money laundering requirements.

The MPC emphasised that all bureaux de change foreign exchange transactions shall be done through the bank's bureau de change transaction reporting system.

"The bank will continue to review and refine measures to enhance the sustainability of the foreign exchange auction system which has been critical in anchoring the management of foreign currency and price and financial system stability in Zimbabwe," part of the statement read.