Zimbabwe: Govt in Forex Transactions U-Turn

Zimbabwe's bond notes and U.S. dollar notes.
28 July 2019

Government has backtracked on the recently enacted Statutory Instrument 142 of 2019 which outlawed multi-currency following its decision to allow fuel companies, embassies, chrome miners, international NGOs and individuals with access to free funds to conduct certain local transactions in foreign currency.

Last month, the government deregulated the use of foreign currency for settlement of local payments through a Statutory Instrument 142 of 2019 which established a mono-currency system hinged on the Zimbabwean dollar.

In a circular issued by the Reserve Bank of Zimbabwe to local banks yesterday, it stated that embassies, exporting corporates and individuals with access to foreign currency can now pay for fuel in foreign currency and large scale chrome producers can also pay small scale miners for deliveries in foreign currency.

"Oil Marketing Companies licensed by Zimbabwe Energy Regulatory Authority (ZERA) shall be required to open and operate a Nostro FCA (transitory) which requires prior Exchange Control approval , wherein exporting corporates, embassies, NGOs, International Organizations and individuals with access to foreign currency shall transfer funds into,"

"In order to enhance the operations of this critical sector which is dominated by small scale miners, with effect from 24 July 2019, large scale chrome producers and smelters may pay for chrome deliveries from small scale producers through Nostro FCA transfers,"

"The small scale chrome producers are therefore required to open Nostro FCA (exports) for purposes of receiving payment for chrome deliveries. No cash payouts are allowed, payments will only be done through bank transfers," read the circular.

However the move is meant to improve access to foreign currency for fuel companies in the wake of worsening fuel shortages.

This is also meant to lessen pressure for foreign currency on the interbank market which is currently being overwhelmed by demand.

But the development is expected to bring joy to small scale chrome miners who will now be paid for their deliveries to large scale producers and smelters in foreign currency.

However analysts say the latest announcement is likely to unlock billions of foreign currency in bank accounts of exporting companies who are somewhat hesitant to trade their earnings on the interbank market.

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