Zim Central Bank tightens screws on foreign currency use
By Fani Mapfumo | Zim Morning Post |
Business entities which have not complied with the moral suasion directive to display prices for goods and services in Zimbabwe dollar and foreign currency at the ruling market exchange rate will now face the full wrath of the law, Zimbabwe’s central bank has said.
This follows the gazetting of Statutory Instrument 185 of 2020 published on 24 July 2020.
“Pursuant to the Bank’s Press Statement of 17 June 2020 directing providers of goods and services to display, quote or offer prices for such goods and services in Zimbabwe dollar and foreign currency at the ruling market exchange rate as determined by the foreign exchange auction, a significant number of business entities have taken heed of this requirement,” RBZ governor John Mangudya said in a statement.
“Regrettably some business entities have not complied with the moral suasion directive. With the amendment of the law now having been effected through Statutory Instrument 185 of 2020 published on 24 July 2020, the law will now take its course in respect of non-compliance.”
Turning to the Foreign Exchange Auction, Mangudya said since the inception of the Foreign Exchange Auction System on 23 June 2020, all weekly Foreign Exchange Auctions have been conducted smoothly and bids have been settled on a timely basis.
“The Foreign Exchange Auction has so far been able to achieve its main purpose of price discovery in order to reduce exchange rate volatility, stabilise prices and enhance transparency in the management of foreign exchange,” he said.
“To date, a total amount of US$71.1 million has been traded on the Foreign Exchange Auction, with the number of bids increasing from 92 at the commencement on 23 June 2020 to 290 bids received on the recent Foreign Exchange Auction of 21 July 2020,” Mangudya continued.
“Funds allotted were mainly utilised for productive sector import requirements including procurement of raw materials and packaging (US$32.1 million), machinery, plant, equipment and spares (US$18.2 million) procurement of medicines, chemicals and consumer goods (US$16.5 million) and services (US$4.3 million).”
The central bank said priority shall continue to be given to productive sector imports whilst service and capital payments will be restricted to no more than 20% of auction allotments.
Turning to the ruled of the Foreign Currency Auction, Mangudya said “a few have been found wanting for various reasons ranging from failure to abide by Exchange Control Regulations and failure to disclose to their bankers their foreign currency account balances, especially by multi-banked entities.”
“It is against this context that, going forward, all bidders are required to sign a declaration of compliance with the Foreign Exchange Auction Rules,” he added.
“Failure to make the declaration and false declaration will result in penalties including bid rejection. Banks should continue to conduct Customer Due Diligence (CDD) to ensure that funds are used for permissible and legitimate transactions and to adhere to Know Your Customer (KYC) principles to safeguard the integrity of both the Foreign Exchange Auction System and the banking system as a whole.”
“Individuals and entities are reminded to bank cash received from the sale or provision of goods and services as required by the Bank Use Promotion Act [Chapter 24:24],” Mangudya said.
“The requirement to bank cash extends to foreign currency received in respect of sale or provision of goods and services. Banking of cash will enhance circulation of money within the economy.”
Sale of Petroleum Products
The RBZ said Oil Marketing Companies and retailers of petroleum products are also required to display, quote or offer prices for petroleum products in Zimbabwe dollar and in foreign currency as
required by law.
“All foreign currency realised from the sale of petroleum products should be banked in the domestic foreign currency accounts which shall be subject to monitoring by the Bank’s Exchange Control Division and the Financial Intelligence Unit,” Mangudya said.
“Banking of sales proceeds will assist the efficient replenishment of petroleum products in the market.”