Nostro position improves despite weakening interbank rate

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    Harare – Zimbabwe’s nostro account balances have been on an upward trajectory for over 5 months since October 2018 and reached a recent high of $235.5 million in February .

    Notably the forex balances position as shown by nostros have been strengthening since the separation of accounts between nostro FCA and RTGS FCA in October 2018.

    The separation brought clarity to the issue of value especially considering the rampant inflation and its effect on value erosion. It also led to improved confidence In the banking system which recognized the difference between the 2 currencies.

    Likewise, foreign currency balances held by local depository corporations responded to the  separation of accounts with both individuals and corporates opening FCA accounts.

    Figures show that local banks held forex increased from 58.5 million in June to a high of $113.4 million as at January 2019.

    The above improved volumes of forex banked in Zimbabwe and outside on bebalf of local individuals and companies, shows improving public perception and confidence in a liberalized system.

    It was clear that the separation was a precursor to the introduction of a new currency and the liberalization of the exchange rate which was to follow in February 2019.

    Worryingly, the interbank exchange rate has shown gravitating weakness since its consummation in February. To date the exchange rate has worsened by 31% to about 3.25 times RTGS$ for every single USD.

    The weakness stems from a lack of liquidity supply on the interbank market. Exporters who are the predominant holders of forex have been not been forthcoming to the market citing sub optimal returns given the prevailing rates.

    The desired convergence between the interbank and the parallel exchange rate has not been achieved as the 2 have moved in parallels since the beginning. The gap has in some instances widened.

    In one of the interviews the RBZ governor said average daily trades were valued at around $2.5 million in the first 12 days of trading which compares grossly low to Zimbabwe’s average daily demand of over $9 million in forex imports daily.

    Presenting its full year earnings to December, crocodile skin producer, Padenga, said it has asked for a waiver from the 30 day moratorium to suit its cyclical business nature.

    It said there were concerns regards the disparity between the interbank rate and the average rate of local cost component increase factor which makes it suboptimal to dispose at market rates. Padenga exports crocodile skin to Europe, America and Asia.

    Similar concerns were also raised by the CZI after charged rebuke by the Vice President at the ZITF.

    Responding to allegations of deliberate machinations by business to discredit the interbank and government’s efforts, the industry lobby group said it felt the interbank rate is too low and that the moratorium was punitive.

    Equity Axis News

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