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Golden Sibanda
The Reserve Bank of Zimbabwe (RBZ) on Friday introduced a raft of measures to buttress efficiency of the foreign exchange auction while eliminating deficiencies in the mobile banking system that were hurting the domestic currency.
This comes as the bank noted that the auction system had accounted for more than 87 percent of the foreign currency needs of importers since the auction system was introduced on June 23, 2020.
Chief among the measures the central bank has introduced to foster currency and price stability and end volatility that has been rocking the economy is the requirement for businesses that sell in forex to liquidate part of their revenue upon depositing with the bank.
The bank now also requires bereaux de change to charge 5 percent above the auction market weighted average exchange rate and liquidate 80 percent of their forex holding every Monday at the ruling rate.
Further the central bank said that mobile phone agent lines were no longer serving their purpose other than being abused for illegal foreign currency dealings that have been hurting local currency, hence have been abolished with immediate effect.
RBZ governor Dr John Mangudya, said in his midterm monetary policy statement that the foreign exchange auction had managed to minimise the volatility in the exchange rate, which was the principal driver of the price instability in the economy.
Accordingly, the auction or market exchange rate has continued to be below the parallel exchange rates of between $95 -120 to US1$ that the market was using before the introduction of the auction system on 23 June 2020.
This positive development on the exchange rate has thus significantly stabilised prices in the national economy and should be sustained, Dr Mangudya noted.
Reflecting recent developments on the foreign exchange auction, blended annual inflation is forecast to gradually fall to 249 percent by December 2020 and further to single digit levels by December 2021.
The annual inflation jumped to 837 percent from about 737 percent in June on the back of incipient inflationary pressures of foreign exchange rate upward movement.
As such, following the decision to allow the use of free funds in the pricing of goods and services, Dr Mangudya said the apex bank was encouraged by the growth of foreign exchange balances in the domestic foreign currency accounts (FCAs).
To ensure that some of the domestic-generated forex is utilised to sustain the auction, with immediate effect and going forward, 20 percent of the foreign currency receipts of providers of goods and services shall be liquidated at the point of depositing in the domestic FCAs.
“For the avoidance of doubt, all existing balances in the domestic Foreign Currency Accounts (FCAs) will not be affected by this policy.
“This policy measure shall also not apply to recipients of free funds including individuals, embassies, non-governmental organisations, tobacco and cotton producers and domestic FCAs for fuel companies,” Dr Mangudya said.
The RBZ is also further liberalising the activities of bureaux de change to enable them to enhance their business by increasing the exchange rate spread from the 3.5 to up to 5 percent above the auction rate.
The bureaux de change will be required to sell at the auction at their reserve price, 80 percent of their balances held every Monday.
On the basis of a forensic audit by RBZ, findings and recommendations thereof, the bank will implement a cocktail of measures to address these shortcomings.
Transactions by individuals shall be pegged at $5 000 per day. Individuals shall be allowed to undertake person to person transfers, person to merchant payments for goods and services, settlement of bills and purchase of airtime.
Following the suspension and freezing of agent and bulk-payer wallets on 27 June, 2020, mobile money operators have allowed illegal foreign currency dealers to use multiple individual wallets as a means to bypass the transaction limits.
“Mobile money operators shall, with immediate effect, close all multiple wallets, and allow just one
wallet per individual,” Dr Mangudya said in his midterm policy.
Retailers and other service providers will be permitted to continue operating merchant wallets to allow the public to pay for goods and services.
But merchants shall not be allowed to make payments from their wallets. E-value held in merchant wallets shall be liquidated to the merchant’s bank account.
“Agent wallets are no longer serving any legitimate purpose and were now being used primarily for illegal foreign exchange transactions.
“Agents’ mobile money wallets are therefore abolished, with immediate effect.
“Agents currently holding value in suspended and frozen wallets shall be allowed to liquidate the funds to their bank accounts, upon the Financial Intelligence Unit (FIU) having satisfied itself of the legitimacy of the source of funds,” Dr Manguyda added.
He said that mobile payment operators have been turning a blind eye and have even actively encouraged the abuse of bulk payment wallets for illegal foreign currency trading transactions, thus earning lucrative transaction fees in the process.
Going forward, bulk payment wallets will be approved by regulatory authorities for limited use, primarily for low value transactions and humanitarian funds disbursements to vulnerable members of the society.
Any other bulk payment transactions, such as payment of salaries and wages, shall be processed through normal banking channels.
Online Reporter