THE Reserve Bank of Zimbabwe (RBZ) has directed banks to furnish it with the pipeline of foreign currency demand from clients for the period to June 2024, and also ordered the institutions to desist from the previous practice of match-making buyers and sellers of forex by serving clients on a first come first served basis.
Analysts said the directives were meant to deal with potentially distortionary parallel market conduct by authorised dealers following the introduction of new currency measures by authorities.
This comes after RBZ governor Dr John Mushayavanhu last week introduced a new currency, Zimbabwe Gold (ZiG), as part of several policy measures to tame Zimbabwe’s volatile exchange rate, which has driven rapid increase in inflation.
Zimbabwe ditched its domestic currency for the second time in just over a decade after it lost over 80 percent of its year-opening value, amid sustained depreciation.
Delivering his maiden monetary policy statement in Harare on Friday, the new central bank chief also announced the bank would pursue a market-determined exchange rate system on the willing buyer-willing seller interbank market.
Amid challenges presented by limited foreign currency, volatile exchange rate and parallel market activities last year, following the introduction of the willing buyer-willing seller (WBWS) interbank market, the apex bank once warned banking institutions to desist from matchmaking forex clients.
In a foreign exchange directive issued this week, the bank said to establish immediate foreign exchange requirements from authorised dealers’ clients already submitted as of April 08, 2024, banks were directed to provide details of the currency pipeline demand to June 2024.
“This information should be submitted to exchange control…by 1600hrs, Tuesday 09 April 2024,” the bank’s acting foreign exchange control director Tafadzwa Muvevi said.
The bank said under its market-determined exchange rate system, banks would purchase foreign currency from exporters for resale to importers on a willing buyer-willing seller basis.The foreign currency purchased under this system shall be for purposes of funding bonafide external obligations, Muvevi said.
“In administering this foreign exchange trading arrangement, authorised dealers are reminded to serve customers on a first come first served basis and desist from matchmaking of buyers and sellers of foreign currency.”In all cases, authorised dealers must apply Know Your Customer (KYC), due diligence principles as well as anti-money laundering and counter financing of terrorism (AML/CFT) principles,” Muvevi said.
Economist and Small and Medium Enterprises Association of Zimbabwe chief executive Farai Mutambanengwe said through the directive, the central bank was trying to deal with the issue of the forex parallel market.
“Normally, what the banks should do is that they get foreign currency from all their customers and then they put it in a pool and sell to their buyers; the other customers who want to buy foreign currency.”
But when they matchmake, they are just taking two people; one person with forex and another person who needs forex and they negotiate the rate outside of the market. So, those deals are,obviously, done outside of the normal market rate; that is why they are saying they should not do match-making,” he said.
Mutambanengwe added that matchmaking had the effect of distorting the market “because they are not bringing the buyers and sellers into one pot and then coming up with an average price because that is what they are supposed to do”.
He said just picking up a customer and giving them a rate would present hurdles for the policymakers who have made it clear the bank will follow a market-determined exchange rate.
Source: Business Weekly
