ZIMBABAWE has tightened controls on access to foreign currency for companies as authorities battle to stem a thriving parallel market for the scarce currency.
By Kuda Chideme
Corporates in the southern African economy had long been accused of fuelling the black market, adding to the country’s growing economic malaise.
On Monday, government also abandoned a multi-currency regime, in place since 2009 when the country ditched its local currency to escape record-setting hyperinflation.
“Authorised dealers are advised that unconditional authorisation for foreign currency cash withdrawals by corporates has been removed. However, withdrawals by the same on deserving cases such as road toll fees are now permissible only on a case by case basis subject to know-your-customer (KYC) and customer-due-diligence (CDD) principles on the withdrawer,” a directive to local banks by the Reserve Bank Of Zimbabwe (RBZ) released late Tuesday read.
In February, the central bank merged the surrogate bond notes and electronic dollars into a lower-value transitional currency and also established an interbank platform to formalise currency trade, but the mechanism has failed to arrest illegal currency trade.
“In order to deepen the operations of the interbank foreign exchange market and to enhance the operations of bureaux de change, with effect from June 25, 2019, bureaux de change are now permitted to buy and sell currency without any limit in terms of the amount.”
According to the central bank directive, holders of foreign currency accounts (FCAs) are still able to withdraw their cash from their individual accounts.
Finance minister Mthuli Ncube, who is on a mission to reform the southern African economy which before his appointment had been plagued by consecutive budget deficits and unsustainable borrowing patterns, has ambitious plans to introduce a new currency by year end.
He is, however, confronted by a deteriorating economy characterised by rapid company closures and rising inflation, which peaked at 97% in May, resulting in depressed consumer spend and a restive workforce, whose earnings have been massively eroded.
The central bank has also increased lending rates to 50% to mop up excess liquidity in the market.
Interest rates in the southern African nation had been capped at 12% for the past two years, and bankers had been pressing for a review of the lending rates to avert a collapse of the banking sector.
In recent Press appearances, President Emmerson Mnangagwa and his Treasury tsar have hailed the reforms as a return to normalcy, but some analysts contend that the country has not yet established the necessary economic fundamentals, particularly confidence from the transacting public, required to sustain a fully-fledged local currency.
Zimbabweans, whose savings and pensions were wiped out a decade ago when inflation reached 500 billion percent, have still not recovered financially and emotionally, holding very little trust in the formal financial system, let alone talk of a return to the local currency.
The latest bout of inflationary pressures raises fears of a return to the dreaded hyperinflationary era, but fiscal authorities in Harare are playing down the recent surge in prices, suggesting that these are temporary shocks.