Zimbabwe moves to protect FCAs

FINANCE minister Mthuli Ncube says government is working on measures to ensure that corporates and individual nostro foreign currency accounts (FCAs) are not easily raided by the central bank as a way of boosting confidence in the economy.
Last week, the central bank directed all banks to effectively ring-fence policy on nostro foreign currency accounts that it introduced in February, by separating foreign currency accounts into two categories, namely Nostro FCAs and RTGS FCAs.
The apex bank also announced that it was finalising discussions with the African Export-Import Bank (Afreximbank) towards a US$500 million nostro stabilisation guarantee facility (NSGF) to provide account holders with assurance that foreign currency shall be available when required.
“Over and above the Nostro Deposit Protection Guarantee from Afreximbank, we are also reinforcing nostro foreign currency accounts with a statutory instrument to guarantee that these are private deposits, and neither the Reserve Bank of Zimbabwe nor government has access to them,” Ncube said in a statement issued yesterday.
Government expects these measures “to encourage exports, diaspora remittances, banking of foreign currency into the nostro FCAs and to eliminate the co-mingling or dilution effect of RTGS balances on nostro foreign currency accounts”.
Both the central bank and Treasury maintain that the relationship between the two categories of FCAs shall continue to be at parity, despite the significant discounts levied on the RTGS deposits and bonds notes in the informal markets.
“Government recognises concerns surrounding RTGS deposits, and we commit to preserve the value of these balances on the current rate of exchange of 1 to 1, in order to protect people’s savings,” the minister said.
According to the central bank, foreign currency in the nostro FCAs pertains to free funds, diaspora remittances, international organisations’ remittances, portfolio investment inflows, loan proceeds and export retention proceeds.
The bank says all exporters retain 100 percent of their export proceeds with the exception of gold producers that retain 30 percent of export proceeds, platinum, diamonds and chrome 35 percent and, 20 percent for tobacco and cotton producers.
The minister said a currency reform will follow the execution of various economic reforms, including “the cutting on government expenditure, working towards import parity pricing system, increasing efficiency on government delivery systems and fast-tracking state-owned enterprises reforms”.
Ncube noted that the country shall continue to use the multi-currency system which was put in place by government in 2009.
“This system entails that foreign exchange earners are not prejudiced of their regulatory foreign exchange receipts and that those who do not earn foreign exchange have access to foreign exchange through the banking system as is per the current policy of foreign exchange management. In parallel, the Reserve Bank shall continue to maintain adequate resources for the import of essential commodities,” he said.
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