Business Editor
THE country has traded nearly US$800 million on the interbank market since its introduction in February, harnessing the much needed forex to improve procurement of services by Government and curtail black market activities in the country, Reserve Bank of Zimbabwe Governor Dr John Mangudya has said.
In his 2019 Mid Term Monetary Policy Review Statement themed “Transition to Normalcy” presented on Friday, Dr Mangudya said the fruits of the introduction of the interbank rate were beginning to show through foreign currency rates stabilisation.
A number of companies have been licensed as Bureau de Changes, most of which are already operating.
He said: “The introduction of the interbank foreign currency market was meant to address the foreign currency grid-lock arising from widening parallel market activities by harnessing foreign exchange through the formal market.
As a result, about US$799 million worth of foreign currency has been traded on the interbank market since its introduction.”
Dr Mangudya said the availability of foreign currency in the formal system was beginning to bring positive changes “with some stability being observed on both the availability and price of foreign currency, with some significant positive spill over benefits to the prices of goods and services in the economy.”
Dr Mangudya said RBZ was also introducing USD-denominated Savings Bonds in order to promote a savings culture and to provide reasonable return on FCA Nostro account deposits and USD cash held by individuals and firms.
He said the bond, introduced with immediate effect will attract interest rate of 7,5 percent per year, have a minimum tenure of one year, tax exempted in line with Government policy, will have liquid asset status, tradable and acceptable as collateral for overnight accommodation by the RBZ.
Dr Mangudya said in the wake of changing operating environment, banking institutions must continuously evaluate their capital adequacy in relation to their risk profiles.
“Against this background, all banking institutions are therefore expected to pro-actively reinforce their economic capital levels in order to ensure that the institution’s risks are well covered. Going forward, all Tier 1 banking institutions are required to hold core capital of at least ZWL$200 million by December 2020 in order to support risks associated with their business activities.
The minimum capital requirements for banking institutions under Tier 2 and Tier 3 shall remain at the current levels and shall be reviewed next year.”
He said the bank’s rate for overnight borrowing has also been revised upwards from 50 percent to 70 percent to take account of developments on inflation and the exchange rate.
This will also likely see banking institutions review lending rates to individuals and companies
Dr Mangudya said however, gold deliveries to Fidelity Printers and Refineries which stood at 12,3 tonnes for the period January to June 2019 was a 40,6 percent decline compared to 17,3 tonnes that were delivered during the comparative period in 2018.
“Exchange rate, pricing and payment issues, which partly accounted for the decline in deliveries have, however, been largely resolved through the recent monetary policy measures.”
He commended small-scale producers, who despite facing a plethora of challenges, continued to dominate the country’s gold deliveries, accounting for more than 60 percent of total deliveries.
Some of the highlights of the monetary policy statement
- Inflationary pressures beginning to recede as retailers adjust their prices in line with the relative stability of the interbank market and falling parallel exchange rate premiums.
- RBZ to implement timeous and effective communication of economic and monetary developments to help anchor inflation expectations.
- Current account deficit narrowed from a peak of US$2,7 billion in 2011 to US$1,4 billion in 2018 and is projected to further contract to US$597,2 million in 2019.
- Inflation pressures expected to dissipate. Both the annual and monthly inflation are expected to moderate over time.
- To print more notes and coins to ease cash shortages.
- Total foreign exchange receipts for the period January to June 2019, amounted to US$2,58 billion, compared to US$3,40 billion received during the same period in 2018, representing a 24 percent decrease.
- Export shipments for the period January to June 2019 stood at US$1,90 billion, a 7,5 percent decrease from US$2,06 billion.
- Cumulative exports for the five-month period up to May 2019 stood at US$1 558,2 million, a 5,1 percent increase from US$1 482,9 million realised in the comparable period in 2018.