The Reserve Bank Govenor, John Mangudya, delivered his first quarter monetary policy statement on February 4 stating that an unsustainable situation of money flowing out of the country dwindling the liquidity position of the economy and that urgent attention is required to remedy the problem.
With a total of $1.8 billion being externalised out of the country in 2015, $1.2 billion by corporates and $684 million by individuals under ‘creative wordings’ thus exporting liquidity and transformation needing to take place in order for Zimbabwe to address the leakages. Stringent prudential measures to plug illicit financial flows have are to be implemented by the Reserve Bank of Zimbabwe (RBZ).
If you have the time to do through the monetary statement, download and read it here (PDF), otherwise here are the items that stood out in the statement:
1. ‘Free funds’
‘Free funds’ was a term used during the Zimbabwe dollar era to refer to foreign currency that was earned/gained outside an individual’s normal trade activities and were not subject to exchange control regulations. Now that we are under a dollarised economy, this term no longer holds true (so all money is foreign currency) and hence RBZ is doing away with this pseudo foreign exchange classification.
2. Suspicious Transactions
Previously financial institutions (e.g. banks) had to report suspicious transactions through the “Suspicious Transaction Reports (STRs)” after a transaction was done but its usefulness has been questioned. Financial institutions are now required to report suspicious transactions BEFORE outward processing them to the RBZ.
3. Plastic Money and Bank Transfers
To promote the use of plastic money and bank transfers banks will now require clients to give at least 24 hours notice in order to make a withdrawal of $10,000 or more. This is done in order to minimise the unnecessary burden on consumers of carrying and paying in cash, while it was noted that other economies do it to curb money laundering.
4. Foreign Bank and Financial Accounts
Every person that is subject to the jurisdiction of the Zimbabwean financial system is now required to report all their interests in or has authority over one or more financial accounts or securities or investments in a foreign country. Individuals should report to the RBZ, through normal banking channels, any accounts or securities if the aggregate value at any point in a calendar year exceeds US$10 000. Further, no offshore investments will be made without prior Bank approval.
5. Offshore Related Companies
Companies have increased service payments between between related companies, especially holding companies and their subsidiaries or sister companies, though resulting in cost savings from group shared services, some corporates have been inflating service fees in order to externalise foreign currency.
In order to guard against externalisation by related companies through service payments, management fees, technical fees, service fees or by whatever name they come under, shall not exceed an aggregate of 3% of revenue and shall require Bank approval.
6. Purchase of Rands and Other Currencies
All banks are now instructed to purchase from the banking public at the official exchange rate
for onward selling to RBZ the following currencies: South African Rand, Euro, British Pound Sterling, Chinese Yuan/Renmimbi, Botswana Pula, Australian Dollar, Indian Rupee and the Japanese Yen.
7. No Charges On Savings Accounts
The RBZ has called on banks to remove administrative charges on basic “no frills” savings accounts in order to promote access to banking services by the majority of Zimbabweans. The levying of charges on savings accounts dissuades people from investing their surplus funds in the banking sector.
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