The Reserve Bank of Zimbabwe has directed the various foreign currency users and handlers to deposit hard cash into Nostro Foreign Currency Accounts in a development largely seen as a move to boost foreign currency availability.
Nostro account refers to an account that a bank holds in a foreign currency in another bank, and Nostros are frequently used to facilitate foreign exchange and trade transactions.
Last year, the central bank directed financial institutions to separate Nostro FCAs (Foreign Currency Accounts) from RTGS (Real-Time Gross Settlement) accounts last year, with Nostro FCA balances currently hitting circa US$700 million from $130 million in mid-October last year.
But with the monetary authorities having introduced an inter-bank foreign currency trading platform in February, banks have been struggling to meet industry and individuals’ foreign currency requirements.
In the latest development around Nostro FCAs, the central bank has issued exchange control guidelines on the treatment of foreign currency receipts by holders of free funds.
According to an exchange control directive, circular number of 2019 issued by the central bank, dated March 27, 2019, individuals selling goods and services to entities that receive offshore funds, such as embassies, non-governmental and international organisations, are required to keep such funds in domestic foreign currency accounts (FCAs).
The circular also contains several other directives on the treatment of foreign currency in the country.
Foreign currency payments to hospital or health institutions by non-residents, and retail shops shall be kept in a nostro foreign currency account of the recipient.
The RBZ also directed that donations and grants shall also be treated as free funds and not subjected to the 30-day retention period before being sold on the interbank market.
Free funds will also not be subjected to retention thresholds.
Further, monetary authorities said in the circular that insurance premiums denominated in foreign currency and paid by non-residents shall be deposited into nostro FCA (transitory) account of the respective insurance company.
The reserve bank also said operation of nostro FAC (transitory) accounts for insurance premiums shall require prior specific exchange control approvals.
And on tourism receipts, the RBZ said that the 20% foreign currency surrender portion due to it from payments through international Visa Card and MasterCard maybe remitted as bullet transactions on a monthly basis.