THE runaway black market, which had thrived in the just-ended multi-currency system, was all but pacified yesterday in response to Government’s measures to contain fiscal and monetary problems in the country.
There was subdued activity on the street and among foreign currency dealers as they reeled from Monday’s sea-change measures that Government introduced via Statutory Instrument 142 of 2019.
And yesterday, the Reserve Bank of Zimbabwe (RBZ) announced a raft of measures to tame the parallel market, including the scrapping of unconditional authorisation for foreign currency withdrawals by companies.
The measures from RBZ’s Exchange Control Division were issued in terms of Section 35 (1) of the Exchange Control Regulations Statutory Instrument 109 of 1996.
“Authorised dealers are advised that unconditional authorisation for foreign currency cash withdrawals by corporates has now been removed,” reads the notice.
“However, withdrawals by the same on deserving cases such as road toll fees are now permissible only on a case by case basis subject to the application of know-your-customer (KYC) and customer due diligence (CDD) principles on the withdrawer.
“These principles to be applied should be in line with Anti-Money Laundering and Counter Terrorism (AML/ CFT) regulatory requirements and best practice.”
Experts say the decision by the RBZ will curb the proliferation of the parallel market for forex, which was responsible for runaway prices of basic goods and services as producers and sellers followed the US dollar parallel market rate.
There was suspicion that some corporates that were selling their products in forex were withdrawing large sums of money from their Nostro Foreign Currency Accounts (FCAs) and offloading it on the parallel market.
This saw rates spiking to obnoxious levels, and impacting negatively on prices of goods and services, leaving disadvantaged members of society and low-income earners exposed to high costs of living.
Since the proclamation of Statutory Instrument 142 of 2019 by Finance and Economic Development Minister Professor Mthuli Ncube on Monday, the parallel market rate for forex dropped significantly from a high of about US$1:RTGS$15 to US$1:RTGS$11 by yesterday.
The measures by the RBZ are expected to result in significantly lower parallel market forex rates going forward, which will result in declining prices of goods and services.
Among other measures, the RBZ also reminded authorised dealers that the limit of export cash in person or baggage remains at US$2 000 per exit as per Exchange Control Directive RS119 of August 4, 2017.
“For individuals, the current policy shall remain in force with authorised dealers also required to apply the usual KYC and AML/ CFT standards,” reads the statement. In terms of legacy debts registered with the central bank in fulfillment of Exchange Control Directive RU28 of February this year, authorised dealers were directed to transfer all RTGS dollar balances to the RBZ.
Retention thresholds for export receipts and tobacco and cotton offshore loan drawdowns remain as previously communicated.
The RBZ also intends to sell 50 percent of the export retention due to it, to the interbank market to enhance its operations.
This will result in more forex on the interbank and suffocate the parallel market.
Further, to deepen the interbank market and enhance the operations of the bureaux de change, the bureaux de change are now allowed to buy and sell forex without limit as from yesterday.
Previously, bureaux de change could only transact up to US$10 000.
To promote trade on the interbank, the RBZ also scrapped the 2,5 percent margin on forex trades with immediate effect.
Small-scale gold producers with Nostro FCAs will not have their funds subjected to the 30 day retention period so as to encourage them to deliver more gold to Fidelity Printers and Refiners (RPR), a gold buying arm of the RBZ.
However, the current gold marketing framework shall continue to apply.