Alex T Magaisa, a former adviser to the late former Prime Minister of Zimbabwe, Morgan Tsvangirai has said that RBZ’s latest directive on foreign currency can be interpreted in many ways. Below is his twitter thread in which he makes sense out of the FBC bank circular that is circulating on social media.
1. This is what I gathered from the FBC circular to its staff over the handling of Nostro FCAs. The thread starts here: • A company/organisation may pay wages in USD if it has approval from the RBZ’s Exchange Control Unit. The wages should be paid into the employee’s Nostro FCA
2. Cash withdrawals from the Nostro FCA are banned unless the RBZ approves a specific application stating the “reasons and circumstances” for the cash request. This makes the process of cash withdrawals cumbersome & potentially slow & frustrating.
3. The forex in the Nostro FCA may be used to meet domestic transactions but only upon conversion to the ZimDollar at the “prevailing rate”, presumably meaning the Interbank market exchange rate. This, of course, is lower than the parallel market rate.
4. For foreign transaction, “bona fide foreign payments”(payments made in good faith) from the Nostro FCA are permitted. They must be authorised by the bank & must be backed by relevant documentation. Bank managers have been given specific responsibilities to avoid penalties.
5. These foreign payments specifically exclude transfers to offshore accounts or offshore investments (where a person has an account in a foreign country or foreign investments). They also, it appears, exclude transfers between Nostro FCAs.
6. If a Nostro FCA accountholder does not use their forex within 30 days of its receipt, it will be compulsorily liquidated at the Interbank Market rate. In other words, the government will simply convert the unused forex at the Interbank market rate.
7. As a Nostro FCA-holder, you are forced to use it within 30 days or lose some of it through compulsory conversion at the Interbank market. It’s a Command policy which restricts freedom & constitutes a deprivation of property, the legality of which can be challenged in the courts.
8. Banks must keep a register tracking movements in the individual Nostro FCA accounts to guard against abuse. The bank has placed responsibility on branch managers with the warning that non-compliance will attract penalties. This will mean a strict, rigid & frustrating approach
9. This increased regulatory demand of banks’ vigilance will mean more administrative & compliance costs on banks. These costs will obviously be passed on to customers, thereby increasing the cost of banking. When banking is expensive, people avoid it. It affects savings.
10. The implications are that while getting wages in forex may be an advantage (& a concession to partial dollarisation by the government), the use of it comes with onerous duties and cumbersome processes. Privileged employees will welcome the advantage but it comes at a price.
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