Mangudya’s Policy Measures to Boost Confidence in Zimbabwe

Mangudya's Policy Measures to Boost Confidence in Zimbabwe
Image Credit: Reuters

Reserve Bank of Zimbabwe governor, Dr John Mangudya gave the Monetary Policy statement in Harare yesterday entitled “Strengthening the Multi-Currency System for Value Preservation and Price Stability”. In the statement, the central bank governor gave 13 policy measures “designed to boost confidence and transparency in the foreign currency market and to rein in inflation by mitigating against rent-seeking behaviour and mopping up excess liquidity within the economy”.

The following is a summary of the policy measures given by the governor:

1, Strengthening the Multi-Currency System by introducing separate FCA accounts for Nostro and RTGS funds

Banks are here directed to operationalise the ring-fencing policy on Nostro foreign currency accounts by separating foreign currency accounts (FCAs) into two categories, namely Nostro FCAs and RTGS FCA. The deadline for banks to comply with this policy measure is 15 October 2018.

2, Credit Lines for Strategic Requirements

RBZ put in place facilities amounting to US$500 million; from Gemcorp (US$250 million), Afreximbank (US$150 million) and Afrigrain (US$100 million); to cater for the importation of strategic requirements that include fuel, electricity, cooking oil, wheat, packaging, etc.

3, Foreign Payment Transactions

The RBZ put in place measures to minimise incidents of externalisation of foreign currency. These include:

(i) Use of Letters of Credit (LCs) for high value transactions.
(ii) All imports to be supported by invoices whose banking details match with
the payee’s name and bank account details.
(iii) Strict adherence by banks to customer due diligence (CDD).
(iv) Export proceeds to be remitted on a timely basis in line with existing rules
and regulations.

4, Purchase of Fuel in Zimbabwe by Foreign Truckers in Foreign Currency

Foreign truckers plying the Zimbabwean routes shall pay their fuel in Zimbabwe in foreign currency. Foreign traders buying goods in Zimbabwe for sale in the neighbouring countries shall also purchase using foreign currency.

5, Purchase of Gold by Jewelers in Foreign Currency

All purchases of gold by jewellers from the Fidelity Printers and Refiners (FPR) shall be in foreign currency and jewellers shall retain 100% of their export proceeds.

6, Settlement of Capital Gains Tax in Foreign Currency when using Offshore Funds

All sellers of immovable property to buyers with offshore funds are required to pay Capital Gains Tax from offshore sources into a ZIMRA Designated Nostro FCA. Evidence of payment shall be required during ZIMRA interviews to enable issuance of tax clearance certificate.

7, Cross-Border Investment and Offshore Capital Raising Initiatives.

Offshore investments in the form of offshore holding companies intending to dispose of part of their shares to foreign investors shall be required to repatriate all the realised proceeds to Zimbabwe.  In cases where the offshore holding company intends to expand into other countries, a minimum portion of raised capital equal to the level of dilution should be remitted to Zimbabwe to support local operations.

8, Introduction of Statutory Reserve Requirement to mop up excess liquidity

With effect from 1 November 2018, RBZ shall introduce the statutory reserves requirement at a level of 5% on GTGS FCAs on a weekly compliance basis to mop up liquidity from the market.

9, Issuance of Treasury Bills (TBs) Through an Auction System

From 1 November 2018, RBZ shall be inviting tenders, on behalf of the government, for investors to participate in the auction system of treasury bills (TBs).

10, Continuation of RBZ Savings Bonds

The central bank will continue using savings bonds for mopping up excess liquidity from the market.

11, Construction Finance Facility

The Reserve Bank has expanded the productive sector facilities to include the establishment of a $50 million Construction Finance Facility for retooling and working capital requirements for the construction industry. The facility shall be disbursed through normal banking channels with an all-inclusive interest rate of 10%.

12, Strengthening the Monetary Policy Committee

The central bank is strengthening the Monetary Policy Committee (MPC) to provide an effective process for Monetary Policy in line with best practice.

13, Capitalisation of Banking Institutions

Banking institutions are required to revisit their respective capitalisation plans to ensure compliance with their preferred strategic tier capital requirements on the set date, and submit revised plans to the Reserve Bank by 30 June 2019.

blank

Be the first to comment

Leave a Reply

Your email address will not be published.


*