RBZ unveils forex facility for traders
THE Reserve Bank of Zimbabwe (RBZ) has put in place a foreign exchange facility for cross-border traders and directed banks to reduce lending rates and domesticate settlement of local card transactions on international card switches as part of a cocktail of measures to promote monetary and fiscal stability.
This comes as the economy grapples under a tight liquidity situation characterised by US-dollar cash shortages, low industrial production, uncompetitiveness of exports, low aggregate demand and high cost of funding, among others.
But the central bank is calling for the transformation of the economy, saying Zimbabwe needs to pursue a new economic development model anchored on an export-led growth strategy to balance exports and imports while addressing structural rigidities besetting the economy to expand output.
In his 2017 Monetary Policy Statement, RBZ Governor Dr John Mangudya said the central bank would set up a facility for bona fide cross-border traders registered with any recognised association to be accessed from March 1, 2017.
The facility would be made available through normal banking channels and Easylink.
“In line with best practice and in order to mitigate against money laundering and to inculcate market discipline, the central bank is availing a facility for bona fide cross-border traders,” Dr Mangudya said, adding that modalities of the facility were being finalised by banks and relevant cross-border associations.
This should come as a boost to cross-border associations that are facing difficulties in accessing foreign currency and are prone to using the parallel market to sustain their businesses.
Dr Mangudya said the RBZ would meet the associations to map out the best way to set up the facilities and which financial institutions they would be comfortable to work with.
“The associations will then work out how much they require and we will put up the facilities matching the values they would have given us.”
To make credit more affordable, the central bank directed banks to ensure that lending rates should not exceed 12 percent per annum and that bank charges that include application fees, facility fees, and administration fees, should not exceed 3 percent.
“Affordable credit is very important to enhance output and productivity.
“Therefore, for the national economy to flourish, affordable credit must be provided to both large and small scale businesses and individuals to enable them to invest in productive activities that increase jobs, exports and reduce poverty,” Dr Mangudya.
On bank charges, Dr Mangudya said the new bank charges to individuals applicable since last year, should also apply to small scale enterprises in order to encourage financial inclusion. This is effective immediately. Small scale enterprises were charged under company accounts.
Dr Mangudya further directed banks to submit to the RBZ by February 28, 2017, a detailed report indicating the current level of charges for account maintenance and ledger fees as at December 31, 2016. “RBZ shall continue to monitor bank charges to ensure access to affordable banking services and at the same time promote the use of ◆
◆ plastic money.”
To preserve foreign exchange in nostro accounts, Dr Mangudya directed banks to domesticate the settlement of local card transactions on international card switches. This comes after transactions settled through Visa and Mastercard were the second largest users of foreign exchange between July — December 2016 at $206.7 million as they hit nostro accounts directly. The amount also includes DSTV transactions amounting to around $45 million.
Dr Mangudya spoke strongly against the lack of discipline in the utilisation of nostro accounts which in turn puts unnecessary pressure on the country’s foreign exchange reserves that should ideally be used for international or offshore payments.
“The $206.7 million should have been settled locally. A country cannot spend more forex on DSTV subscriptions than on raw materials to produce cooking oil. This is not only counterproductive but also illogical.
“RBZ has directed all banks to ensure that the international card switches facilitate local settlement of local transactions in the country. This will allow local banks to carry out interbank settlements within Zimbabwe.” To this end Visa local settlement will be enabled by the end of February 2017 while MasterCard local set- tlement will be enabled by the end of the quarter.
Dr Mangudya said the same cards would be used for international payments but that would depend on the systems that the banks use.
“Other systems automatically switch when the cardholder is outside the country, much in the same way that mobile phones go on roaming when a user is outside the country. Others will introduce two cards, for local payments and international travel but this depends on the available technology”
Dr Mangudya also noted that Zimbabweans were externalizing foreign exchange to offshore banks and this put unnecessary pressure on the country’s balance of payments . “As reported by banks that report to the Bank of International Settlement, deposits held by Zimbabweans at offshore banks have been on-going and currently stand at above $600 million.
The Governor include the need for strict adherence to the import priority list by banks and dispelled reports that the RBZ is controlling the use of forex in the country yet it only handles 25 percent of receipts which it redistributes to the market for productive imports. From July to December the bank handled 14.4 percent of foreign receipts which were distributed to fuel, debt service repayments, grain imports and raw materials.