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Governor of the Reserve Bank of Zimbabwe, John Mangudya, speaks during his presentation of the monetary policy in Harare, on October 1, 2018. (Photo by Jekesai NJIKIZANA / AFP)

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Liquidate your export earnings: RBZ chief

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CENTRAL bank governor John Mangudya has implored local companies holding foreign currency in their nostro accounts to utilise it to meet their offshore obligations and ease the pressure on the forex exchange auction system.

DUMISANI NYONI

Mangudya told The NewsHawks that local entities had a total of US$1.2 billion in their nostro accounts but they were not utilising the cash, preferring acquiring forex from the auction system.

“We are very happy with the auction system. The policy measures that we have been pursuing over the past seven months now are very useful. We are going to continue with it and also we are refining the rules of the auction system,” he said.

In a bid to ease forex shortages in the economy and curtail runaway inflation as well as marauding parallel markets, the Reserve Bank of Zimbabwe (RBZ) last year introduced the forex auction system. On average, about US$30 million is being allocated per week to different companies across all sectors of the economy.

Asked whether the central bank had plans to conduct an auction twice a week, Mangudya said: “For now, given the size of our economy, I don’t believe that we need to have two auction systems a week. It will just increase our administration costs for no apparent reason. The largest entities in this country that need foreign currency, the likes of Delta among others, now have enough foreign currency for themselves from the sale of their produce, most of them to their customers.

“They have got their own foreign currency and they can use it themselves. The auction is there to supplement the foreign currency requirements in the market. If you look at it right now, we have got US$1.2 billion in the nostros of the banks and this money belongs to their customers, not the banks.
“That US$1.2 billion is available for use by the owners of that money as I speak right now and this is excluding the local US dollars. This is the real US dollar, both in cash and in their nostro positions in foreign banks.”

The RBZ chief said the entities have enough foreign currency at their disposal but they were not utilising it.

“So if a company needs, say US$4 million per month, if they have got US$60 million in their nostro accounts it means that US$60 million is enough to cover US$4 million but they still come to the auction, say for US$2 million.

“They get that US$2 million. If you put more days, it means they can get US$8 million yet they have got their money. What we want is to encourage the companies themselves to also utilise what they are holding so that they don’t hold (foreign currency),” he said.

Ideally, Mangudya said, if everyone plays ball in this country, the auction should be so lower than it is now “because those people are all earning foreign currency.”

“If you look at the (deposits) in this country, you are looking at about 54% of the total deposits in Zimbabwe in foreign currency and 46% in local currency. So it means that we have got sufficient US dollars to sustain (our needs),” Mangudya said.

“The US$1,2 billion is just sitting in the nostro accounts. It used to be US$1,1 billion, now it’s at US$1,2 billion. So it’s going up. Money should circulate in the economy to make things work. This country should be great.”

In a bid to refine the auction system, the RBZ monetary policy committee (MPC) last week resolved to remove the compulsory requirement to liquidate all unutilised export proceeds after 60 days, with immediate effect.

It also resolved to increase the export surrender requirement from 30% to 40% on all export receipts as well as maintaining the liquidation requirement for domestic foreign exchange sales at 20% net of sales tax, with authorised dealers required to remit funds to the bank in the currency of receipt.

The committee resolved to ensure that the allotment of foreign currency on the foreign exchange auction and Interbank market continues to be guided by the priority list which places productive imports (raw materials, consumables and capital goods) ahead of foreign exchange requirements for services, education and portfolio investment.

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