RBZ makes U-turn on outstanding surrender, auction payments

In his maiden Monetary Policy Statement in April, RBZ governor John Mushayavanhu said all outstanding payments for foreign exchange purchased under the surrender requirement and outstanding auction allotments would get NNCDs of one year and two years respectively.
HOLDERS of non-negotiable certificates of deposit (NNCDs) will now get tradable government bonds, the Reserve Bank of Zimbabwe (RBZ) has said, as it buckles under pressure from companies with outstanding foreign currency allotments.

Companies were owed millions by RBZ after buying foreign currency from the auction system which was, however, not allotted.

They were also owed after selling 25% of their foreign currency proceeds under the export surrender rule.

In his maiden Monetary Policy Statement in April, RBZ governor John Mushayavanhu said all outstanding payments for foreign exchange purchased under the surrender requirement and outstanding auction allotments would get NNCDs of one year and two years respectively. This riled firms.

In his Mid-Term Monetary Policy Review Statement released last week, Mushayavanhu announced a U-turn.

“All outstanding payments for foreign exchange purchased by Treasury under the 25% surrender requirements and all outstanding auction allotments during the transition period from ZWL to ZiG which were supposed to be issued with NNCDs for one year and 24 months, respectively, have been refined from NNCDs to tradable government bonds,” he said.

He said central bank would in the transitional period, continue to use non-negotiable certificates of deposits to manage liquidity.

“The Reserve Bank will, however, tighten the liquidation rules to ensure that the monetary policy stance remains tight enough to engender price and financial stability,” Mushayavanhu said.

He said the central bank would continue to redeem the existing gold backed digital tokens and gold coins in the customer’s currency of choice, although there would be no new issuances of these instruments.

The central bank will be injecting more ZiG into the market to ensure convertibility of forex to local currency, the central bank said.

“The Reserve Bank is satisfied by the general acceptance and uptake of ZiG in the economy. To ensure increased circulation of ZiG in the economy the following measures will be undertaken: [i.] Increase the injection of cash in line with demand while preserving the ongoing initiatives to entrench the country’s cash-lite economy,” Mushayavanhu said.

“[ii.] Continue to inject more small ZiG denominations into the economy to ease the problem of change and eliminate the rounding up of prices by businesses; [iii.] Work to smoothen the glitches that have been observed in the distribution of cash and ensure that ZiG reaches the remote and rural areas and the informal markets to effectively foster financial inclusion; and [iv.] Expand initiatives such as the Homelink Swipe for ZiG kiosks and related arrangements to other provinces, towns and business centres to increase the wide usage of ZiG.”

The RBZ will also continue to participate in the foreign exchange market by liquefying the foreign exchange market with 50% of the 25% export surrender to ensure operational flexibility within the supply and demand dynamics.

“The Reserve Bank has been strategically intervening in the market using 50% of the surrender export proceeds to ensure that bona fide and genuine pipeline demand from banks is satisfied,” Mushayavanhu said.

He said given the stability of inflation and exchange rate, the bank policy rate and the corresponding interest rate corridor will be maintained at 20% and 11%-25%, respectively.

“The Reserve Bank will continue to use a hybrid monetary anchor with the exchange rate as an intermediate target. To ensure that the exchange rate remains stable, the Reserve Bank will keep reserve money growth under check,” Mushayavanhu said.-newsda