Free funds exempt from retention policy

07 Apr, 2019 - 00:04 0 Views
Free funds exempt  from retention policy

The Sunday Mail

Golden Sibanda
Senior Business Reporter

FREE funds held in domestic nostro or foreign currency accounts (FCAs) will not be subjected to the 30-day retention period, which applies to export receipts, before being compulsorily sold on the interbank market at the ruling exchange rate, the Reserve Bank of Zimbabwe (RBZ) has said.

The guidance is part of a foreign exchange control directive issued by RBZ that prescribes rules for treatment of foreign earnings from various sources such as the tobacco industry, tourism sector, grants and donation receipts among others.

The directive also warns of stiff penalties against dealers who may abuse the laid down foreign exchange rules for free funds, including cancellation of dealer licences.

Exporters may however, only retain their foreign exchange proceeds for longer than 30 days in exceptional circumstances and following approval by the RBZ.

RBZ governor Dr John Mangudya introduced, through the Monetary Policy on February 20, 2019, a 30-day retention period for all export earnings, after which the funds are offloaded or sold to importers on the interbank market at the ruling exchange rate with sellers getting their dues in the form of RTGS dollars.

Pursuant to the Monetary Policy Statement of February 20,  the RBZ introduced the interbank forex market where the Zimbabwe’s currency (RTGS$) is traded against the US dollar and other foreign currencies.

But the RBZ said, through exchange control circular 04 of 2019, that provisions of exchange control directive RU 28 of 2018 prescribing the rules on the 30-day retention period for export receipts before they are offloaded on the interbank market, shall not apply to funds held in domestic nostro accounts as these were free funds.

“As previously advised, the export retention period of 30 days stipulated in exchange control directive RU 28 of March 18, 2019 shall not apply to proceeds credited into nostro FCAs (Domestic), as these funds are considered free funds.

“The funds shall be offloaded on to the interbank market at the ruling interbank exchange rate when the recipient requires RTGS dollars to settle domestic transactions,” RBZ exchange control director Farai Masendu said in a circular, which was issued recently by the central bank.

The circular goes on to designate free funds as donations and grants to local recipients, forex payments to hospitals, health institutions and shops by non-residents and foreign currency payments by foreign students and non-residents.

Further, free funds also entail foreign currency receipts for payments for goods and services by non-governmental organisations, embassies and international organisations.

The apex bank said that FCA nostro balances shall at all times be appropriately housed in the correct foreign currency account and that failure to adhere to the exchange control requirement will attract severe punishment.

“Exchange control shall clearly monitor the inflows and outflows from the nostro FCAs to ensure market players do not abuse the nostro FCA accounts,” Mr Masendu said.

In line with exchange control RU 28 of 2019, exporters shall be entitled to utilise their retained export receipts within 30 days from the date of receipt.

All unutilised balances shall after the 30-day retention period, be offloaded into the interbank market at the prevailing market exchange rate.

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