RBZ scraps controversial mandatory forex liquidation period

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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
  • Exporters no longer required to liquidate forex earnings in 60 days
  • Export Surrender Requirement however increased from 30% to 40%
  • Adjustments aimed at ensuring sustainability of Forex Auction System

In a move aimed at strengthening the foreign currency auction system, the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) has resolved to remove the compulsory requirement to liquidate all unutilized foreign currency export earnings after 60 days as from the 7th of January.

Prior to this, exporters were expected to utilise their foreign currency earnings within 60 days, of which failure to do so would result in the RBZ converting the foreign currency into local currency at the prevailing exchange rate.

This was however detrimental to the ease of doing business which is a big goal for Zimbabwe under the recently enacted National Development Strategy (NDS1) and mostly disadvantaged big business organizations like mining ventures.

The compulsory liquidation period had seen The Chamber of Mines of Zimbabwe (CoMZ) engaging the central bank on the issue citing that mining projects had long gestations and required time to execute and may still be in process when the liquidation period falls due meaning it was therefore only fair to either extend or scrap the liquidation period.

Meanwhile, in the same meeting, the RBZ also resolved that instead of 30% it would now increase the Export Surrender Requirement to 40% meaning exporters will only receive 60% of their foreign currency earnings while the remaining 40% will be retained by the bank and given to them in the local currency at the prevailing rate.

Other decisions from the MPC include to maintain the liquidation requirement for domestic foreign exchange sales at 20% of the net of sales tax while Authorised Dealers will be required to remit funds to the RBZ in the currency of receipt.

All these resolutions are ultimately founded on the idea of “refining and enhancing the sustainability of the Foreign Exchange Auction System” according to Reserve Bank Governor John Mangudya which was greatly instrumental in the achievement of the relatively stable macro-economic environment from June 2020 and the taming of the runaway exchange rate and the hyperinflation which had soared to as high as 837% Year on Year in July 2020.

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