If you read the RBZ statement too quickly, you'll miss the key detail here. Zimbabwe's govt is allowing "free funds" ( money in an FX nostro account) to be used for local DIGITAL transactions, that implies it must be banked.. newzwire.live/zimbabwe-lifts… via @newswireZW #zimbabwe
..and if one pays for goods and services with these funds "via digital means in the interest of social distancing", the rate will be fixed at ZW$25:US$1, since the directive does not say goods can be charged in US$, they will stil lbe charged in ZW$ #Zimbabwe
Free funds= FX received by individuals, international organisations, NGOs, embassies etc Free funds will continue to be received and held in Nostro FCAs for use to settle international transactions and digital local transactions for goods charged in local tender.
so what has changed? Previously those using free funds (legally) would have to convert their cash into ZW$ through banks and BDC @ the market rate. Now rate is fixed and they dont have to endure the 'shoe leather' cost of going out to change it. #Zimbabwe
In addition to this there's a lot of stimulus being planned here to prop up the limping economy- including a 1000bps cut, fiscal packages for the agri sector (wheat) and some QE.
This comes at a time when policymakers globally are implementing a raft of stop-gap measures to ease the impact of Covid-19... the next moves by Zimbabwe's govt could be interesting ( noting that this is a temporary measure as per the press release) rbz.co.zw/documents/pres…
IF... (a big if) ..they impose a lockdown (even one that just covers the 2 main cities), similar to South Africa's, where only grocery stores, pharmacies and banks are allowed to operate, then it would be difficult for those trading FX in the parallel market to operate... and
it will promote "digital transactions in the interest of social distancing" especially for those with USD ...and of course with only a few businesses allowed to operate it would be easier to police adherence to the fixed exchange rate. #Zimbabwe ..but this is all"if"
Fact is, the spread btwn 'managed float' & parallel rates was widening fast, & with mining sector down due to weak external demand dynamics+risk-off sentiment in global markets-#Zimbabwe's BOP faces risks, so agri exports & import substitution will be the focus,hence the stimulus
#Zimbabwe. Free funds includes USD cash that can be used to pay for goods and services chargeable in local currency.
Digital transactions are being encouraged in the interest of social distancing. This implies it should be banked, mobile money counts too. Key point rate is fixed
Digital transactions are being encouraged in the interest of social distancing. This implies it should be banked, mobile money counts too. Key point rate is fixed
