Lusaka – Zimbabwe businesses and depositors must brace for another currency showdown with Government as the foreign currency strapped nation moves in to liquidate all locally funded RTGS Nostro accounts for corporate and individual depositors to a local currency in the next 48 hours, ENN exclusively reports.
Policy Inconsistency
In a circular to authorised dealers dated 22 February 2019 titled Exchange Control Directive to Authorised Dealers (RU 28/2019), but believed to have been first released to the dealers on the 21st of March 2019 by the Reserve Bank of Zimbabwe Governor John Mangudya, line item 5.1 (Administration of Foreign Currency Accounts) states that “ In line with Exchange Control Directive RT120 dated 4 October 2018, Authorised dealers shall continue to maintain separate foreign currency accounts and report the same on the EC Form Bank Nostro & RTGS Balances. These are accounts funded by offshore only. Besides the highlighted, all RTGS FCAs shall now be re-designed into RTGS Dollar Accounts in line with the interbank market framework announced in the Monetary Policy Statement, the report authoritatively states. Internal sources at the Reserve Bank of Zimbabwe speculated that this directive will come into effect from Monday, March 26, 2019. In Lusaka and Johannesburg, businesses and individuals with locally funded RTGS FCA accounts were in a rat race yesterday trying to empty their bank accounts before the new law takes effect, ENN reports. Both business and leisure travellers from Zimbabwe were afraid that their locally funded FCA accounts maybe liquidated whilst in transit, in the process affecting their financial plans.
A deepening Currency Crisis
Zimbabwe is experiencing a deepening foreign currency crisis as both foreign and local investors remain pessimistic of the country’s ease of doing business and policy consistency. With the nation entering a defining moment after experiencing a drought in the 2018 agriculture season, foreign currency from agriculture, tobacco in particular looks set to drastically fall from its 2018 record output performance of almost 180 million kilogrammes. The country requires an estimated USD$3.2 billion to address the drought threats to its affected communities. The healthcare system in Zimbabwe is also miserable with documented shortages of drugs, bandages and basic medical equipment in the country’s public hospitals. With another humanitarian crisis looming after devastations to properties, human lives, road networks, fuel networks and livestock by cyclone Idai, the southern African nation is in turmoil.
The RBZ partially liberalised its foreign exchange market with an initial exchange rate of 1US$:2.5RTGS Dollars. As at March 23, 2019, the interbank foreign exchange rate stood at 1US$: 2.9RTGS Dollars against a free/black market exchange rate of 1US$:4RTGS Dollars. Since introducing this exchange rate and restrictive foreign currency retention rates to small scale gold miners and other economic sectors, gold remittances to the Apex bank by small scale miners registered a significant drop as a show of lack of confidence in the recently introduced monetary policy measures on the sector.
Public Trust
These policy developments come at a time Zimbabweans are yet to gain trust in their Government following a trail of policy betrayals that date back to year 2009 when the country dollarized and wiped off all local currency bank balances for its depositors after registering record breaking hyper-inflation levels. In September 2016, the RBZ introduced bond notes as an export incentive, pegged at par with the US$ and guaranteed by the Afreximbank. Barely two years after its introduction, was the bond note devalued to a rate of 1US$:2.5RTGS Dollars by the same authorities, in the process short changing its investors and citizens. In October 2018, the Zimbabwe government introduced a 2 percent tax on all electronic transactions, a fiscal policy intervention that triggered multiple price increases in the country as businesses hedged against this business threat. In all these monetary and fiscal policy shifts since 2018, the Zimbabwe consumer bared the brunt as salaries and disposable incomes were eroded by a factor of five, considering that they were once pegged at a rate of 1US$:1 Bond note.T
