IN a major policy shift, the Reserve Bank of Zimbabwe (RBZ) this week all but directed banks to embrace the parallel market foreign exchange rates as it also re-aligned the rate at which local fuel distribution companies should source forex.
RBZ governor John Mangudya said the measures should apply from Tuesday this week.
“The bank has directed banks to effectively apply the willing-seller willing-buyer principle to ensure that the interbank foreign exchange market is reflective of market conditions. Accordingly, banks must ensure that there are no moral hazards in the operation of the interbank foreign exchange market,” Mangudya said.
“In this regard, all the foreign exchange requirements for banks for their own use include dividend payments, subscription fees, etc, would need prior Exchange Control approval for the proper conduct of the interbank foreign exchange market. Similarly, banks should discontinue twinning arrangements for their customers as this undermines the efficient operation of the interbank foreign exchange market.”
The measures mean banks are free to trade forex at parallel market rates.
Mangudya also warned about the moral hazard of the policy implying banks must not monopolise forex for their own use alone. The RBZ boss also said there should be no underworld dealings between banks and companies through patronage or crony arrangements.
On fuel, government stemmed the US$180 million monthly loss associated with the scrapped 1:1 exchange rate subsidy to the fuel sector, but the tax collector has lost half of the US$260 million revenue it was previously raking in from the 2% fuel duty.
Government announced this week that fuel importers will now have to access forex on the interbank foreign exchange market instead of accessing it from the central bank at the 1:1 exchange rate.
“The Reserve Bank of Zimbabwe is pleased to advise the public that with effect from 21 May 2019, the procurement of fuel by oil marketing companies (OMCs) shall be done through the interbank foreign exchange market,” Mangudya said. “There shall be only one foreign exchange rate to be used in the market for the importation of all goods and services. This means that the 1:1 exchange rate that was being used by OMCs for the procurement of fuel will be discontinued with immediate effect.”
Government reduced duty payable from a litre of diesel from US$1,80 to US$0,90 cents and duty payable to petrol from US$2,30 to US$1,15. Before this, the government used to collect US$260 million monthly from fuel duty alone. However, it used to subsidise the fuel sector to the tune of US$180 million a month.
Now government will be able to collect only US$130 million a month.
“The new position is necessary to promote the efficient use of foreign exchange and to minimise and guard against incidences of arbitrage within the economy,” Mangudya said.
“As previously advised, the bank is proceeding to make a drawdown of US$500 million from an offshore line of credit to supplement the country’s foreign exchange receipts in order to underpin the interbank foreign exchange market for the purposes of meeting foreign payment requirements of businesses and individuals.”
The country needs 32,5 million litres of fuel weekly, which translates to 130 million litres monthly.