Zimbabwe says US dollars should be sold to those making foreign payments only

Zimbabwe’s commercial banks are under orders to restrict US dollar transactions to companies and individuals with foreign payments to make, according to a central bank directive that demonstrates the slow progress of currency reforms.

The document, a measure of the foreign exchange controls that remain in place six days after authorities announced moves to ease chronic cash shortages, also states such transactions should be aimed at stimulating economic growth.

It was sent to banks on Friday.

Zimbabwe abandoned the 1:1 dollar peg for its dollar-surrogate bond notes and electronic dollars last week, merging them into a lower-value transitional currency called the RTGS dollar.

It launched the RTGS dollar in a “managed float” at 2.5 per US dollar, but banks have yet to start selling hard currency in cash.

Banks were only selling US dollars to firms and individuals with invoices or receipts for imports deemed a priority, such as fuel and medicines.

“All interbank market sales to individuals and corporates shall be restricted to funding of external obligations,” and banks should submit dealing reports every two hours, the Reserve Bank of Zimbabwe (RBZ) directive said.

Dealers were encouraged to take steps “to ensure efficient utilisation of foreign currency that is tilted towards the productive sectors of the economy,” it added.

The state-owned Herald newspaper reported that Botswana had offered to lend Zimbabwe $600 million to support its diamond industry and private firms.

Economists say the RTGS reform shows promise provided the government makes good on a plan to let the new currency fluctuate.

Finance Minister Mthuli Ncube said yesterday that, while the market should determine the RTGS rate, the government wanted to avoid excessive volatility.

However, the current official rate values the RTGS far higher than on a thriving black market that many ordinary Zimbabweans use to buy and sell US dollars.

The central bank has sold small amounts of US dollars to banks at 2.5 RTGS in recent days, and a currency dealer said that the RBZ had authorised banks to buy and sell US dollars at 2.5 percent either side of that rate.

Tellers at two banks in downtown Harare said they could help clients make payments for overseas purchases at 2.5625 RTGS, the rate that other banks offered yesterday.

However, “the RBZ hasn’t given us any US dollars in cash yet,” a teller at a CABS bank branch said.

The central bank sold what it called “seed foreign currency capital” to banks, but the sums in question appear to be tiny.

A senior RBZ official told The Standard newspaper around $5 million had changed hands on the interbank market on Friday.

Bureaux de change can in theory sell people US dollars in cash, but they are few and far between and the central bank directive said some would have to re-apply for operating licences.

One exchange bureau at the Road Port bus station in Harare was not selling US dollars in cash yet but hoped it would start making sales next Monday.

Exchange rates on the black market for the bond note – which many people still use in shops – were at 3.6 to the U.S. dollar, unchanged from yesterday, informal currency traders said.- TR

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