The amount of foreign currency held by the banking sector jumped 38% between September and November 2018, reaching near two-year highs following a central bank directive to separate forex accounts from bond note and electronic deposits, official dats shows.
Banks held US$84.6 million at the close of November, up from US$61.5 million at the end of September, just before the central bank announced the ring-fencing of forex deposits.
Banks’ forex holdings have plummeted since 2015, and current stocks are still way below the monthly average of US$200 million before the crisis set in during the last quarter of that year.
The introduction of tight exchange controls in May 2016, which saw the Reserve Bank taking control of foreign currency allocations to key economic sectors, as well as the introduction of a parallel ‘bond note’ quasi-currency later that year, worsened the country’s forex crisis.
The authorities have said the separation of foreign currency accounts from bond notes and electronic deposits, which stood at just under $10 billion at the end of November, was the first step towards reforms that will culminate in the re-introduction of a local currency.
The second step was the setting up of a platform to allow local electronic transfers of foreign currency.
The central bank is expected to float the bond notes and electronic deposits, which are currently pegged at parity to the United States dollar. The currency peg proved punitive to exporters and it has created pricing distortions that are hurting business.
Most exporters, including gold and tobacco producers, surrender significant amounts of their earnings to the central bank, in exchange for over-valued electronic deposits and bond notes.
The production of gold, Zimbabwe’s top export, collapsed 59% percent September and November 2018, as a result of the foreign currency crisis.