Foreign Currency receipts impress Monetary Policy Committe

by | Sep 1, 2021 | Business | 0 comments



Nevanji Munyaradzi Chiondegwa


The growth and increase in foreign currency receipts is critical for sustaining the foreign exchange market and fostering exchange rate stability.


This was said by the the Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe which met on the August 27 and deliberated on recent economic and financial developments and their implications on monetary policy.


The Committee which met against the background of the receipt of the US$961 million on August 23 from the International Monetary Fund, expressed satisfaction with the strong economic growth which it said is set to be strengthened by the favourable global economic outlook and the SDR allocation.


In a statement, issued after the meeting RBZ Governor Dr John Mangundya said; “In particular, the Committee welcomed the impressive performance of foreign currency receipts which increased by 32% to US$5.09 billion as at 7 August 2021 compared to US$3.85 billion received during the same period in 2020.

On the other hand, cumulative foreign exchange payments increased by 42% to US$3.59 billion as at 7th August 2021 compared to US$2.52 billion for the same period in 2020. The significant increase in foreign currency receipts is critical for sustaining the foreign exchange market and fostering exchange rate stability.”


The need for staying the course on the current monetary policy stance was also emphasized, given that it has proved effective in combating inflation which is now in the double digit range.


Dr Mangudya said ,“Against this background, the MPC emphasised the need for staying the course of the current monetary policy stance which has proven to be effective in combating inflation and fostering monetary stability in the economy. Commendably, the prudent monetary policy stance has seen year-on-year inflation dropping from 837.5% in July 2020 to 50.2% in August 2021”


Other resolutions by the committee include expunging the foreign exchange allotment backlog of around US$175 million.


The MPC urged the Bank to clear the backlog in a month’s time to enable the Bank to operate the auction system within the set rules of funding auction allotments within two weeks from the date of auction.


The Committee also agreed to the refining of the foreign exchange auction system to enhance its purpose as a dependable and efficient mechanism of availing foreign currency to the economy by aligning the auction bidding process to the ultimate beneficial ownership concept.

The refining would be achieved via the following; Maintaining the US$500 000 and US$20 000 maximum bid limits for primary producers under the main auction and SMEs auction, respectively; capping bid limits for secondary users, consumables and services at US$100 000 under the main auction; and encouraging the business community and banks to ensure that they exercise customer due diligence on all foreign exchange transactions in compliance with international best practices.


Bureau de change operations were further liberalised to promote financial inclusion by allowing them to process small value foreign currency transactions of up to US$50 per person per week on the basis of individual identities, with charges and commissions levied by the bureaux de change not exceeding 10% per transaction.


The MPC also agreed to allow the Reserve Bank to urge banks to encourage their clients to invest in interest bearing and value- preserving financial instruments available at the Bank, including time deposits and exchange rate indexed bonds.