Foreign currency holdings in local banks reached their highest level in 21 months, data from the central bank for the month of November 2018 has shown.
At $84,6 million, the holdings, are at their highest level since February 2017 when the local banking sector had $96,8 million worth of deposits.
The figure is also 20,17 percent higher than the $70,4 million that was in banking vaults in October and the $61,5 million in September. Foreign currency deposits were at their lowest in the last two years in September 2017 when only $38,1 million was held in deposits.
The growth in foreign currency deposits, notes and coins, can be viewed as a positive response to the measures that were taken by both Treasury and the Reserve Bank of Zimbabwe to separate banking accounts into FCA Notsro and FCA RTGS. In October 2018, the monetary authorities ordered banks to separate Nostro foreign currency accounts (FCAs) from the real-time gross settlement (RTGS) deposits.
According to RBZ Governor Dr John Mangudya, the opening of nostro accounts would help stamp out the leakages of foreign currency onto the black market. Responding to questions on the separation of Nostro FCA accounts and RTGS deposits, Dr Mangudya said that this was necessary to preserve value for those exporting or bringing in foreign currency into the country.
Banks were also expected to provide reasonable deposit rates on the Nostro FCAs in line with international best practice on such accounts.
The move seems to have worked as foreign currency deposits have been on an upward trajectory since the separation of accounts, which came with promises that the RBZ would not raid private accounts for foreign currency.
Exporters are also benefiting as they can now use FCA accounts to retain 100 percent of their export proceeds with the exception of gold producers that retain 30 percent of export proceeds; platinum, diamonds and chrome 35 percent and; 20 percent for tobacco and cotton producers.
Foreign currency in the Nostro FCAs pertains to free funds, diaspora remittances, international organisations’ remittances, portfolio investment inflows, loan proceeds and export retention proceeds.
Meanwhile the country’s bank balances (nostro balances) with foreign banks at $329,8 million also reached their highest in 23 months.