Overview of exchange control regulations

According to various sources foreign exchange controls are measures or controls imposed by Governments on the purchase or sale of foreign currencies by residents or locals, on the purchase or sale of local currency by non-residents or the transfer of any currencies across national borders.

These controls are meant to control inflows and outflows of currency to avoid exchange rate volatility.

Some of the controls include:

Banning the use of foreign currencies,

Banning local organisations or individuals from possessing foreign currency,

Restricting currency exchanges,

Managing exchange rate such as by fixing it,

Restricting the amount of currency that may be imported or exported,

Controlling imports and exports,

Setting surrender and retention requirements or limits on export proceeds.

Reserve Bank of Zimbabwe (“RBZ”)

According to the RBZ website its Exchange Control Division’s mission is primarily to implement and administer Exchange Control regulations under the powers conferred to the RBZ by the President under section 2 of the Exchange Control Act (Chapter 22:05). The RBZ carries out its mandate by, for example, working closely with the financial institutions it regulates such as banks.

The overall objectives of the Exchange Control Division include:

l Implementing Exchange Control policies and overseeing the administration of Exchange Control Regulations.

lLicensing and ensuring compliance by Authorised Dealers, Money Transfer Agencies and Bureaux De Change with Exchange Control regulations,

l Collecting foreign data, performing descriptive and prescriptive analytics, and communicating the resultant insights to stakeholders,

l Fighting illicit financial flows (anti-money laundering) and ensuring that the country receives value for its exports (fight against externalisation).

l Prevent or redress any adverse balance of payments situation by channelling limited foreign exchange resources to the productive and critical sectors of the economy.

According to the RBZ website its Exchange Control Division also plays a role in the Foreign Investment and Trade Framework.

This administrative and operational framework seeks to introduce the foreign investor to the various investment promotion bodies in Zimbabwe as well as clarifying the regulations clarifying to the remittability of dividends, disinvestment proceeds, contraction of offshore loans as well as projects the foreign investor can invest in. Investment areas covered include greenfield projects, buying Zimbabwe Stock Exchange listed shares, unlisted shares, money market investments, cross border investments, external loans and loan repayments.

Exchange Control regulatory framework in Zimbabwe

The Exchange Control regulatory framework in Zimbabwe include the following:

Exchange Control Act (Chapter 22:05).

Exchange Control Regulations, 1996 (Statutory Instrument 109 of 1996),

Exchange Control (General) Order, 1996 (Statutory Instrument 110 of 1996).

Directives, Circulars and Orders.

Exchange Control Act (Chapter 22:05)

This is the principal Act.

It confers powers and imposes duties and restrictions in relation to gold, currency, securities, exchange transactions, payments and debts, and the import, export, transfer and settlement of property, and for purposes connected with these aforesaid issues.

Section 2(1) of the Act on the regulatory powers of the President states that:

Notwithstanding anything to the contrary contained in any enactment, the President may make such regulations relating directly or indirectly to:

l Gold, currency and securities and transactions relating thereto, and

l Exchange transactions, and

l The control of imports into and exports from Zimbabwe, the transfer or settlement of property, payments and transactions in relation to debts.

Section 2(2)(h) provides for the registration and licensing of persons who carry on any business of dealing in currency.

Exchange Control Regulations, 1996 (SI 109 of 1996)

These regulations were issued by the President in terms of section 2 of the Exchange Control Act (Chapter 22:05). They cover the following areas:

Preliminary issues (Title, Interpretation, Determination of Residence),

Dealings in Foreign Currency,

Control of Payments,

Securities,

Imports and Exports

Insurance policies, settlement, borrowings and investments,

General issues relating to Exchange Control.

The regulations define Exchange Control Authority as:

The Minister in relation to every provision of the regulations and

The RBZ in relation to such regulations as the Minister may specify by Statutory Instrument (SI) and

In relation to any particular provision of these regulations any authorised dealer that is declared, by order, to be an Exchange Control Authority.

Exchange Control (General) Order, 1996 (SI 110 of 1996)

This order was made by the RBZ with the approval of the Minister and covers many areas critical for exchange control purposes.

Exchange Control (Authorised Dealers with Limited Authority) (SI 104 of 2015)

The RBZ website lists this under the Exchange Control Regulatory Framework.

It addresses authorised dealers with limited authority who are financial service providers not necessarily licensed under the Banking Act (Chapter 24:20) but authorised by the RBZ in terms of this order to carry on small value person to person cross border cash transfers or buy and sell foreign currency through money transfer systems designated by the RBZ.

Directives, Circulars and Orders

The RBZ supplements the provisions of the Exchange Control (General) Order, 1996 (SI 110 of 1996), by issuing directions (directives) under the authority conferred by section 35 of the Exchange Control Regulations, 1996 (SI 109 of 1996).

The directions (directives) which the RBZ may issue from time to time, for example pursuant to Monetary Policy Statement, are consistent with the provisions of the Exchange Control (General) Order, 1996. The RBZ website lists some of these directives, circulars and guidelines, etc.

More Articles

Space permitting, more article on Exchange Control regulations to follow.

This simplified article is for general information purposes only and does not constitute the writer’s professional advice.-herald.cl.zw