Golden Sibanda, Harare Bureau
THE Reserve Bank of Zimbabwe (RBZ) has scrapped the US$10 000 daily trading limit for bureaux de change and the 2,5 percent maximum profit margin for banks, in a bid to make the interbank forex market more efficient and bolster Government’s ongoing currency reforms.
This comes after Government on Monday outlawed the multicurrency regime and restricted transactions to local currency (Zimbabwean dollar), to curb widespread market indiscipline that has seen traders quoting prices of essential products and services in US dollars and putting them beyond the reach of many given that the majority earn local currency.
The removal of the multicurrency regime also allows the Reserve Bank to regain full monetary policy control to defend the value of the local currency, whose value has continued to plummet due to black market activities, resulting in most people preferring the stronger greenback.
As such, RBZ Governor Dr John Mangudya said yesterday that the central bank had lifted the administrative limits on the operations of bureaux de change and scrapped the profit caps on banks’ interbank foreign exchange transactions.
The RBZ chief said the decision was taken to improve market efficiency in support of ongoing currency reforms following the abolishment of the multicurrency regime with effect from Monday.
Basically, a bureau de change, is a business where people can exchange one currency for another and in Zimbabwe makes part of the interbank forex market.
“What it means is that bureaux de change are no longer restricted to US$10 000 limitation on their transactions and we have removed the 2,5 percent on the margin for banks and bureau de change to ensure they operate freely to make the interbank market efficient,” the RBZ chief said.
To date, the RBZ has licensed over 46 bureaux de change that are located across the country in a move that increased the number of participants in the interbank foreign currency market, other than banking institutions.
Government on Monday outlawed the use of multiple currencies through new regulations that compel all forms of transactions to be conducted in local currency (RTGS dollar), which was renamed Zimbabwean dollar on Monday.
Through Statutory Instrument 142 of 2019, known as Reserve Bank of Zimbabwe (Legal Tender) Regulations, the Government abolished the use of British pound, United States dollar, South African rand, Botswana pula and any other foreign currency, which are no longer legal tender.
Prior to the latest developments, Zimbabwe used a basket of currencies collectively referred to as the multicurrency system, which was adopted in 2009 after the country’s own domestic currency had been destroyed by inflation.
Until Monday, payments in Zimbabwe could be made in any of the approved foreign currencies that included the US dollar, British pound, South African rand, Botswana pula and RTGS dollar.
The switch to a mono-currency forms part of Government’s economic reforms targeted under the Transitional Stabilisation Programme (TSP), which aims to restore economic stability by putting in place key fundamentals for sustainable growth.
Part of immediate measures taken by the central bank on Monday in support of the ongoing currency reforms was the directive for banks to transfer to the apex bank local currency balances they currently hold as counterpart funds for foreign currency historical or legacy debts.
The Government, through the central bank, will assume the debts at a rate of 1 to 1 between the RTGS dollar and US dollar, which will result in ZWL$1,2 billion being taken out of circulation on the domestic market.
Further, the central bank has adjusted the overnight window accommodation rate to 50 percent per annum from 15 percent per annum in line with inflation trends and to curb speculative borrowing.
In addition, the bank said 50 percent of the export proceeds surrender requirements should be sold on the interbank market, which will be supported by US$330 million letters of credit for essential imports.