Zimbabwe’s apex bank has determined a prioritization list for companies and individuals that will access foreign currency at the new inter-bank foreign exchange market.
Announcing the Monetary Policy statement last week, RBZ governor Dr John Mangudya announced the introduction of an inter-bank foreign exchange market.
Dr Mangudya has said 70 percent of the foreign currency will be utilized for productive sector’s imports and requirements.
According to an Exchange Control directive issued to banks, the new guidelines for utilization of foreign exchange, priority is as follows:
Net exporter who import raw materials or machinery; non-exporting importers of raw materials and machinery for local production that directly substitute import of essential finished goods; imports of critical and strategic goods such as basic food stuffs and fuel, health and agro-chemicals granted these goods are not available locally (to be funded through LCs and allocations from the Allocation Committee), and repayments of offshore loans procured to fund productive activities.
The other priority areas are: payments for services not available in Zimbabwe; foreign investment (capital disinvestments, profits and dividends; remittance of rental income from properties owned by non-resident Zimbabweans and foreign investors that acquired the property using funds originating from offshore and transferred through normal banking channels; remittance of pension income for non-resident Zimbabweans who formally emigrated from Zimbabwe; importation of packaging material not available in Zimbabwe; university and college fees; mining consumables, and goods and services not local available for tourism operators.
“In order to ensure price stability, foreign currency requirements for strategic imports such as fuel, electricity, water chemicals, medicines, cooking oil, and wheat shall be met through Letters of Credit facilities and support by the Foreign Exchange Allocation Committee,” said the central bank.
“Authorized dealers are encouraged to put in place administrative measures to ensure efficient utilization of foreign currency that is tilted towards the productive sectors of the economy.”
Meanwhile, category 2 (or 30 percent of the forex allocation) will go to capital remittances from disposal of local property; capital remittances for cross border investments; funding of offshore credit cards, importation of trinkets, low local content consumer goods and/or goods readily available in Zimbabwe; payments for services available in Zimbabwe, and donations.
Market watchers have given a positive outlook in respect of the inter-bank foreign currency market.
“The interbank system is set to improve company productivity given that manufacturers now have a formal channel to access forex for imports,” says analysts at Akribos Reseach Services.
“For example, Delta has been struggling to secure critical raw materials such as concentrates and this has had a negative impact on its Soft Drinks business; and the interbank FX trading system is expected to play a significant impact in taming inflation given that price increases have largely been driven by exchange rate premiums.”