What you need to know about latest Reserve Bank of Zimbabwe directive on use of free funds

Following the end of dollarisation last month and the inevitable confusion that ensued, the Reserve Bank of Zimbabwe today issued its second exchange control circular to clarify certain aspects of the new regime, particularly on free funds, as well as exemptions for fuel imports and chrome purchases.

Here is the import of the latest circular:

Forex payment for fuel still allowed, but no cash payments at the pump:

Last month’s directive banning forex use for all local transactions caused some confusion in the fuel marketing sector. Many fuel retailers, who were selling the commodity in United States dollars, stopped doing so, adding pressure on already strained supplies.

The latest RBZ circular says direct fuel imports are still allowed, with individuals, exporting companies (especially mines who reportedly account for 30% of the country’s total fuel consumption), embassies, international organisations and NGOs being able to pay for supplies from licenced oil marketing companies in forex. Payment will, however, be in the form of transfers into the fuel retailers’ FCAs, and not cash.

Chrome sector can still trade in forex, but…

Chrome producers and smelters will, from July 24, be allowed to pay for deliveries in forex, but only through inter-account Nostro FCA transfers. Small-scale chrome miners will have to open Nostro FCA (export) accounts in order to receive payments as no cash payouts will be allowed.

Free funds:

This is foreign currency received by individuals, international organisations, NGOs and embassies. In 2018, diaspora remittances (US$597.4 million) and NGO receipts (US$530.4 million) accounted for 18% of the country’s total foreign currency receipts of US$6.3 billion.

Free funds will continue to be received and held in Nostro FCAs for use to settle international transactions.

Pointedly, the RBZ underlines the fact that: “Free funds from international organisations, NGOs and embassies may also be used, through Nostro FCA transfers, for the settlement of local contracts.”

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