HARARE, Zimbabwe — The Reserve Bank of Zimbabwe (RBZ) is facing criticism from business leaders for allegedly interfering in company cash flow management.
This comes after the central bank mandated that companies exhaust their foreign currency account (FCA) balances before seeking foreign currency from the interbank market to meet external invoice obligations.
RBZ Governor Dr. John Mushayavanhu stated in a recent interview that there is sufficient forex on the market to meet the genuine external payment needs of importers. He noted that most companies already possess foreign currency from their forex-denominated domestic sales in an economy that is now 80 percent dollarized. The remainder of transactions is conducted in local currency.
Despite these assurances, industry leaders argue that accessing forex on the interbank market remains a significant challenge. Importers are reportedly struggling to obtain forex even though Zimbabwe’s banking sector holds approximately US$3 billion in foreign currency deposits. In 2023, Zimbabwe earned US$11 billion in foreign currency, outperforming several regional countries outside of South Africa. However, the equitable and efficient distribution of this currency remains problematic.
Some firms are reportedly stuck with substantial amounts of the new Zimbabwe Gold (ZiG) currency, which they are unable to use for importing essential raw materials. This scenario complicates efforts to drive universal acceptance of the new currency across the economy, which is intended to operate as the sole domestic currency by 2030. Currently, Zimbabwe operates under a dual monetary regime, comprising mainly the US dollar and ZiG.
The RBZ asserts that the country has US$80 million worth of ZiG backed by approximately US$300 million in precious metals and foreign currency reserves. The transition to ZiG was made amidst sustained volatility of the previous local currency, which was plagued by inflation and exchange rate instability.
Dr. Mushayavanhu emphasized that there is enough forex on the interbank market for manufacturers with legitimate external payment invoices. He highlighted that some importers prefer to buy hard currency on the interbank market even when they have sufficient balances in their FCAs.
However, business leaders argue that the interbank market remains predominantly a buyer’s market, with few sellers outside of the central bank, which supplies forex from the 25 percent surrender. This supply is deemed inadequate to meet market demands.
“Our currency, ZiG, is more than three times covered by reserves, comprising gold and US dollar cash balances,” said Mushayavanhu. “If someone has a genuine import invoice, they can go to their bank, and we will meet it. What we have noticed is that some want to buy forex even if they have enough in their FCA.”
Market intelligence suggests that companies should be allowed to utilize their local currency holdings as they see fit. Business leaders argue that denying access to the interbank market based on existing FCA balances is counterproductive.
Takunda Mugaga, chief executive of the Zimbabwe National Chamber of Commerce (ZNCC), criticized the central bank’s stance, comparing it to financial repression. He argued that it discourages companies from banking their forex and interferes with free enterprise.
Economist Farai Mutambanengwe, CEO of the Small Enterprises Association of Zimbabwe (SMEAZ), also weighed in, advocating for companies’ freedom to manage their cash flows. He noted that the economy is dollarizing, and businesses need flexibility in managing their US dollar and ZiG balances.
Currently, many economic agents remain reluctant to transact in the new currency due to its limitations and the continued need for hard currency to purchase essentials like fuel.
The Confederation of Zimbabwe Industries (CZI) has engaged authorities to improve access to forex on the interbank market. CZI president Kurai Matsheza has confirmed that discussions are ongoing to enhance the functionality of ZiG as a medium of exchange across the economy.
Source: Business Weekly
