As we have become accustomed to with government legislation it is being done a piecemeal manner. One announcement is sure to be followed up by another announcement that fills in the gaps. As the Zimbabwe dollar was resurrected on Monday in shock development that also ended the multicurrency era we were waiting for the other shoe to drop. That was followed on Tuesday by a directive with amendments to the exchange control act.
Key amongst the developments was the elimination of Nostro Foreign Currency Accounts funded from local funds. The directive spelt out 8 types of foreign currency accounts. Of the 8 types of accounts, the Nostro FCA (Domestic) is for funds from trade before 24 June 2019 while the Individual Nostro FCA caters for diaspora remittances, donations from non-residents and cash deposits in foreign currency. The funds held in such accounts may be used to settle any external obligations. In the event that holders wish to settle domestic transactions, they can buy Zimbabwe dollars on a “willing buyer, willing seller basis”.
The directive goes further to stop unconditional cash withdrawals. Withdrawals are now assessed on a case by case basis and deserving cases to be approved subject to know your customer (KYC) and customer due diligence (CDD) principles.
The directive also highlights that foreign currency retention levels have not changed and lays out the table for these figures. The 30 days “use it or lose it” rule for retained foreign currency is once again reiterated. Bureaux de change limits on amounts of trade were lifted allowing them to buy and sell unlimited amounts.
A relief to those who were concerned about the position on diaspora remittances were included. Remittances will continue to be received in foreign currency and free to keep as cash, a deposit into an Individual Nostro FCA or buy Zimbabwean Dollars on a “willing buyer, willing seller basis”.
In simple terms, the money that was in your FCA before June 24th June remains as foreign currency, no forced conversion into Zimbabwean dollars. The money that goes into there from here going forward will not experience a forced conversion for individuals and will only be converted for exporters after 30 days. Putting money into your FCA is easy but getting it out of there may prove to be a tall order as local transfers are no longer available, external transfers are only available where approved and withdrawals are approved on a case by case basis.
The road ahead is interesting. The term “willing buyer, willing seller” is used many times but not defined. So it’s really hard to make a Determination on what this means for those whose funds will essentially be stuck in these accounts. Administrative limits on Bureaux de Change seem to refer to the limits on the amounts but not the rates, therefore, giving us little change there either. For now, it is business as usual. Perhaps there’s a third shoe yet to drop before we can see any change in the exchange rates on either market unless that change is upward.