The Reserve Bank of Zimbabwe’s Monetary Policy Committee held it’s first 2021 meeting on the 7 of January for the year 2021. A press statement published and signed by Reserve bank Governor Dr John Mangudya gave us new rules which left exporters losers and bureau de Changes as winners. The statement also gave interesting insight through what was not said.

Exporters keep USD indefinitely now

On the bright side exporters will no longer be subject to the effective “use it or lose it” rule that was in place on foreign currency retained after the compulsory surrender. This will come as a relief to many exporters and relieve pressure on the auction system which was going through some problems with paying allotted foreign currency. This will in theory at least reduce demand as exporters will get to keep their foreign currency and not need to go to the auction market in the first place. It is unfortunately not good news for exporters all round.

But surrender 40% upfront

Compulsory surrender for exporters will be increased to 405 up from 30%. Word had it the RBZ was struggling to meet payments for bidders in the foreign currency auction. I would surmise that exporters tended to use their retained forex before they were forced to surrender and thus by the time of forced liquidation there was nothing to liquidate. Ultimately this led to supply-side challenges on the auction market. Get more upfront and foregoing the later forced surrender seems like a win/win; increase the collections of hard currency while reducing the demand for hard currency in the long run.

BDC forced surrender cut in half

Bureau de Changes (BDCs) will get to keep 40% of their foreign currency balances down form 80% previously. This allows BDC to retain more foreign currency on hand. As members of the official system, they get favour from the RBZ and this incentivises them to stay in the game so to speak.

BDC Margin up from 5% to 8%

BDCs also received a margin (read profit) increase from 5% to 8% which also boosts their bottom line. It seems the RBZ is invested in keeping the BDC interested and invested in the foreign currency network.

Daily transaction maximum up to US$2000 and Unlimited daily purchases

Daily transaction maximums through BDCs have also been lifted to US$2000 from US$500. This move addresses the gap that had been left between the BDC upper limit and the SME auction lower limit. In addition to this BDCs have been given the go-ahead to purchase without limits save the per transaction limit. Ultimately this results in more money in the auction system and upfront.

The goals of the bank are fairly clear, get more foreign currency in the auction system upfront to help ease timing of settlement. Thus far the bank has managed to satisfy all demand but there were concerns over how long it was taking. These measures can answer that problem.

One more thing…

Perhaps the most interesting thing about the press statement as a reflection of the discussions of the monetary policy was the total silence on our main legal tender and unit of account the Zimbabwean dollar. A while ago I surmised that the RBZ had no intention of alleviating cash shortages. Though rumours have popped up of the introduction of 50, 100 and 200 dollar notes the silence by the RBZ is telling. While the currency has largely held steady on both the official and parallel market with slight upticks in certain payment methods the Zimbabwean dollar’s situation is far from perfect. There is room for improvement.