From free funds to direct fuel imports, here’s what you need to know from latest RBZ directive:

Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya gestures as he delivers his 2018 Monetary Policy Statement in Harare, Zimbabwe February 7, 2018. REUTERS/Philimon Bulawayo

Following the end of dollarisation last month and the inevitable confusion that ensued, the Reserve Bank of Zimbabwe (RBZ) has today, July 24, 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, newZWire breaks down 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.”

Salaries for NGO and embassy staff:

Salaries for staff working for embassies, international organisations and NGOs shall continue to be transferable into their individual FCAs, “at the discretion of the NGO or embassy.”

When the employees of the said embassies, international organisations and NGOs want to transact domestically, they will have to convert their cash into Zimbabwe dollars through banks and bureaux de change at the market rate.

Expatriates and diplomats are allowed to remit funds to their home countries.

Visa fees charged by embassies:

Embassies are allowed to continue charging visa processing fees in foreign currency. These fees are freely remittable to their home countries. 

Buying forex for tuition, medical, subscriptions and airfares from bureaux de change:

With effect from July 24, bureaux de change allowed to sell forex for foreign tuition, medical services, subscriptions and air tickets to individuals on a willing seller-willing buyer basis, subject to documentary proof backing the transactions.

Bureaux de change may sell up to US$500 to individuals and micro, small to medium enterprises with no questions asked. They may also sell up to US$2,000 to individuals and traders who intend to import goods and services, subject to rules governing imports.

Business and holiday travel:

Bureaux de change may also sell forex to individuals for business and leisure travel.

For business travel, the limit is US$400 per day for up to 7 days. Holiday travellers can buy the equivalent of US$300 per day for a maximum of 7 days, capped at US$10,000 per year.

Blocked funds:

These are foreign currency payments due to foreign suppliers and entities which were not paid due to the shortage of forex. The backlog goes back to January 2016 and the RBZ is compiling a register of all blocked funds. Only foreign liabilities accrued between January 2016 and 21 February 2019 will be considered for this purpose.

Registration started in February 2019 and will end on August 30, 2019.

These foreign liabilities, initially estimated at US$1.2 billion, will now be assumed by the RBZ. 

However, after concerns over what would be a blanket assumption of foreign liabilities, the RBZ has now tightened conditions for the debt takeover with the following restrictions:

  1. Only non-exporting companies, institutions and individuals are eligible for this arrangement. Exporters, government, parastatals and other public institutions are excluded.
  2. Proceeds of disinvestment from the Zimbabwe Stock Exchange are also excluded, since remittances are allocated 15% of available forex on the inter-bank market, in terms of the central bank’s guidelines.

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