eBusiness Weekly
Tawanda Musarurwa
HARARE – The Reserve Bank of Zimbabwe (RBZ) says it has put in place letters of credit (LCs) to the tune of US$330 secure importation of basic commodities.
In view of prevailing foreign currency shortages, the majority of companies are currently dependent on LCs for critical imports such as raw materials and equipment, which are required to keep production going.
And the RBZ has been allocating foreign currency through LCs to local companies for the settlement of foreign obligations such as the importation of raw materials critical for industrial production.
The apex bank also said it is working to improve the interbank foreign currency exchange market. These are part of broader moves by the RBZ to strengthen the Zimbabwe dollar, which was announced on Monday.
“The Reserve Bank of Zimbabwe wishes to announce that it will implement the following support measures to buttress and strengthen the local unit of account….increase supply of foreign currency into interbank foreign market by ensuring that at least 50 percent of the surrender portion of foreign currency is sold to the interbank market.
“This will be supplemented by the use of Letters of Credit (LCs) for the importation of essential commodities that include fuel, cooking oil, and wheat.
The Bank has put in place LCs amounting to US$330 million for this purpose,” said Dr Mangudya in a statement.
On Monday, the Government banned the use of selected foreign currencies in domestic transactions, and made the ‘Zimbabwe dollar’ the sole legal currency for tender.
This effectively puts paid the multicurrency system that was put in place in 2009.
According to Statutory Instrument 142 of 2019 published in a Government Gazette today, Treasury said the Zimbabwe dollar will have the same value as the bond note and RTGS dollar.
The other measures that was announced by the RBZ include: directing local financial institutions to transfer to the central bank the RTGS$/ZWL$s that they are holding as counterpart funds for the foreign currency historical or legacy debt that Government, through the Reserve Bank, is assuming at the rate of 1:1 between the RTGS$ and the US$.
Dr Mangudya said the move is targeted to “mop around ZWL$1,2 billion from the market by the end of this week.”
There will also be an adjustment on the interest rate on the Reserve Bank overnight window upwards from the current 15 percent per annum to 50 percent per annum in line with infl¬ation trends.
And the central bank said it proposed to remove administrative limits on the operation of bureaux de change and on the cap on margins for banks for interbank foreign exchange transactions; as well as to put a vesting period of 90 days on disposal of dual listed securities or shares purchased by investors on the Zimbabwe Stock Exchange.
Government is looking to stifle the parallel foreign currency market to ensure that it does not continue to have a negative impact on the local currency.
