The Sunday Mail
Golden Sibanda
Senior Business Reporter
The Reserve Bank of Zimbabwe (RBZ) has directed banks and other authorised dealers such as Bureax de Change to channel the bulk of foreign currency towards the importation of critical goods and services, as it charges ahead with the push to ensure efficient utilisation of scarce foreign exchange in the country.
Amid a pervasive foreign currency crunch in the country, the RBZ said the highest priority in the allocation of foreign currency traded on the interbank market for forex will be accorded to the importation of critical goods and services that fall under category one, which will take the lion’s share of the forex at 70 percent.
The RBZ issued the directive last week through exchange control directive RU80/2019, which is generally aimed at providing the administrative framework for dealers (Banks and Bureax de Change) on measures to operationalise the interbank market for foreign currency.
The latest exchange control regulations come in the context of the recent statement by RBZ governor Dr John Mangudya, which stated that all forex for fuel imports by oil marketing firms will now be done through the interbank foreign exchange market at the going exchange rate
Previously, the central bank allocated the forex through a committee of the bank at parity rate between local currency and the greenback, which analysts said was not sustainable given the prevailing forex shortages while this also meant subsidising the elite at the expense of the poor and vulnerable.
Following the introduction of the new process for foreign currency procurement by oil marketing companies, effective 21 May 2019, the central bank immediately discontinued allocation of forex to (OMCs) at 1 to 1 parity between RTGS dollars and the green back.
According to the new forex trading guidelines, priority in allocation and sale of foreign currency on the interbank market will be given to net exporters who import raw materials or machinery to enable them to produce and generate more of the much needed foreign currency.
Non-exporting importers of raw materials and machinery for local production (value addition) that directly substitute importation of essential goods will also receive top priority in forex allocation.
Further, imports of critical and strategic goods such as basic food stuffs, fuel, medicines and agro-chemicals that are not readily available in Zimbabwe will also rank high in the allocation of forex by banks and will be funded through letters of credit and allocations from the central bank.
In addition, the RBZ said repayments of lines of credit to productive sectors, payments for disinvestments, remittance of rental income to non-resident individuals and foreign investors, remittance of pension income for non-residents, packaging imports, university and college fees, mining consumables and goods and services for tourism operators will also get category 1 priority.
“Authorised dealers are advised that the guidelines for utilisation of foreign currency are still applicable. In this regard, authorised dealers through the interbank foreign exchange market are directed to support the importation of critical goods and services,” the RBZ said in a circular signed by acting exchange control director Mr Obvious Runesu.
Disinvestment proceeds from the Zimbabwe Stock Exchange (ZSE) (portfolio investments) have been classified as category two priorities, with a 15 percent quarter of the foreign currency allocation.
The third category, which carries a basket weight of 15 percent, will entail capital remittance from disposal of property, capital remittance for cross border investments, funding of offshore credit cards, importation of trinkets, low local content consumer goods readily available locally, including non-commercial vehicles or payments for services available in Zimbabwe.
The central bank said the exchange control regulations are designed to fully operationalise the interbank market, which stuttered since its introduction in February due to liquidity issues, for purposes of getting hard currency to make external payments.
In order to provide the liquidity needed to kick start effective trading of hard currency on the interbank market, the central bank said it had effective last week, begun draw downs on a US$500 million external line of credit. The bank said the interbank market should operate strictly on the basis of the willing buyer-willing seller basis with the seller free to determine the price at which they are willing to sell at.
It also advised that it will continue to facilitate foreign payments through letters of credit for essentials that include fuel, cooking oil, medicines and grain over and above access to foreign currency on the interbank
