ZIMBABWE’S foreign currency market remained strapped for cash a month after the central bank introduced a semi-liberal regime allowing exporters to retain a huge chunk of
their export receipts in foreign currency accounts (FCAs), dealers said this week.
Dealers said exporters were holding on to hard currency under the new system, and were even unwilling to enter into twin arrangements with importers as provided for under the new exchange control regime.
“We’re still to see the fruition of the refined system as it has so far failed to induce inflows into the system,” a dealer told businessdigest.
“The only money coming in is from NGOs (non-governmental organisations) but they are now complaining about the exchange rate,” said the dealer.
The central bank, which devalued the local currency to $250 to the greenback, allowed gold miners and exporters to retain 70% of their foreign currency earnings in foreign currency for an indefinite period.
Exporters were previously only allowed to retain 70% of export receipts in FCAs for up to 30 days, after which they were obliged to liquidate any unused balances into the interbank market.
Gold producers retained about 40% of their earnings in FCAs. The central bank, through subsidiary Fidelity Printers, is the sole buyer of gold in the country.
RBZ governor Gideon Gono said the exporters, who include horticultural producers, would “keep their FCA balances without fear of forced liquidation by either the central bank or the authorised dealers”.
In a later notice sent to authorised dealers, the central bank said exporters could trade funds in their FCAs to importers on a willing-seller, willing-buyer basis for the purposes of financing exchange control approved transactions.
But dealers said both exporters and importers were unwilling to trade under these measures, described as twinning arrangements, because of the disclosure requirements under the system.
“Both exporters and importers are also unwilling to get into the twinning arrangements because they fear the requirement to declare their relationships could open them up to scrutiny for any previous deals,” the dealer said.
Under the twinning arrangement, an importer identifies an exporter with excess FCA balances. The exporter declares excess funds to an authorised dealer, upon which both exporter and importer are compelled to provide certain declarations to the central bank.
Dealers said there was still huge demand for foreign currency on the market, hinting that the bulk of foreign currency transactions ware still taking place on the parallel market where the greenback was selling for a higher rate than that on the official market.
“The rate for the greenback is between $700 and $800 for volume movers. Cash transactions are going for between $600 and $650 for the greenback,” a dealer said.
Gono said in his monetary policy statement in July that the new measures would enable exporters “to smoothly plan their cashflows, build up resources for larger requirements in future as well as create the necessary conditions for a vibrant interbank foreign exchange trading market”.
“We now call upon exporters to now play a more prominent role in building this economy and to stop being cry-babies anymore….it is time to get on with your core business of exporting,” Gono said.