Zimbabwe re-introduces bureaux de change

HARARE – THE Reserve Bank of Zimbabwe has re-introduced bureaux de change as it further liberalises the foreign exchange market in line with the multiple currency system introduced in February

In his monetary policy statement presented in Harare yesterday, RBZ Governor Gideon Gono said Enhanced Money Transfer Agencies would now receive, buy and sell foreign currency to individuals using international cross-rates, effectively bringing back bureaux de change that had been suspended at the height of foreign currency trading irregularities a few years ago.

Therefore, cross-border traders and individuals can now effectively walk into such institutions to transact in foreign currency, as was the case before the foreign currency shortages and their attendant challenges hit the market.

"The adopted multi-currency system, together with the liberalisation of exchange restrictions on the current account means that the public is free to transact and deal in foreign currency.

"This new development makes it possible for the extension of bureaux de change business to include selling of foreign exchange to individuals, using international cross rates," said Gono.

Gono’s Mid-Term Monetary Policy Review Statement comes just two weeks after Finance Minister Tendai Biti presented his Mid-Term Fiscal Policy Review Statement.

Only bank chief executives were invited to yesterday’s presentation, a departure from the norm where guests from across the economic strata have previously been invited.

Furthermore, the central bank yesterday removed the need for prior exchange control approval on exports up to US$1,5 million.

However, all exporters would still be required to complete export documentation (Forms CD1) regardless of the amount.

The threshold for the requirement to complete the Form CD1 was increased to US$5 000 from US$1 000 to facilitate exports by cross-border traders and participation in the export sector by small to medium-scale enterprises without being subjected to the requirement for export documentation.

Dr Gono said the multiple currency system had yielded immense benefits to the national economy although it had "unintended" consequences on pensioners, fixed income earners, some rural folk and others with no direct means of earning foreign currency.

But such benefits as the reversal of hyperinflation from multi-million levels to negative territories in the first half of the year, increased capacity utilisation by companies and general signs of recovery in the economy had been noted.

The central bank yesterday also urged banks to re-introduce cheques, which had been suspended when the multiple currency system was introduced.

This would ease the demand for cash.

On the re-introduction of the Zimbabwe dollar, an issue that has been subject to much debate of late, Dr Gono said there would be no calendar time limits on its re-introduction but that a quicker recovery and sustained growth of the productive sectors would lay a solid foundation for the return of the local currency.

"As monetary authorities, we will continue to carefully gauge the overall performance of the economy to inform us on the appropriate decisions or courses of actions to take, in close collaboration with our principals in the inclusive Government.

"Our strong views and preference, however, are that as Zimbabweans we must have our own currency and autonomy in formulating our fiscal and monetary policies," said Dr Gono.

The central bank, in conjunction with stakeholders in the financial sector, was presently working on the resumption of its lender-of-last resort status to promote smooth settlement among banks while safeguarding financial sector stability.

The domestic currency lender-of-last-resort facility became redundant when the multiple currency system was introduced.

Zimbabwe’s banking sector has generally remained stable although it had been threatened by the introduction of the multiple currency system.

In this regard, the central bank has introduced a phased plan to allow banks to attain their minimum capital requirements which ranged from US$7,5 million to US$12,5 million depending on the nature of the institution.

On inflation, the RBZ chief warned that profiteering and arbitrage trading of fuel, poor preparation for the 2009-2010 agricultural season, intermittent power supplies and high utility charges threatened to reverse gains made in this respect.

"It is, therefore, critical to ensure that as a nation we realise that the lasting solution to the inflation problem is to ensure that our productive sectors, particularly agriculture, surge and sustain their capacity utilisation levels." Herald