The Reserve Bank of Zimbabwe (RBZ) says it is taking advantage of the significant levels of Real Time Gross Settlement (RTGS) balances in the economy to structure cheap financing for the productive sectors.
Typically under the RTGS system, transfer of money between banks happens “real-time”, requiring that transactions are settled as soon as they are processed. However due to foreign currency shortages RTGS balances are now outstripping the foreign currency in banks’ nostro accounts.
Earlier in July, RBZ governor Dr John Mangudya said Zimbabwe had around $1, 6 billion in RTGS balances (otherwise known as ‘usable dollars’).
Ideally, therefore the country should have 40 percent of that amount as foreign currency in nostro accounts.
However, he noted that the country had around $350 million in its nostro accounts, against the ideal target of $600 million, which was resulting in the cash shortages and fuelling cash premiums on the parallel market.
The central bank has since moved to reduce the quantum of these RTGS balances by channeling them to productive sectors of the economy as cheap funds.
In a presentation read on his behalf by RBZ director for exchange control Farai Masendu during the ZimTrade 2017 Exporters Conference yesterday, Dr Mangudya said they were now using the RTGS balances – which are largely lying idle – to boost the capacities of some local companies, especially in the mining sector.
“We do sit with a huge RTGS position as an economy, and the governor has indicated that there is a significant mismatch between our RTGS balances and the nostro position that we have as an economy. What we therefore want to do is exploit these RTGS balances; sweat it significantly, create capacity, generate foreign exchange and boost the nostro position as an economy.
“So we have allowed a number of companies and we have seen quite a number of innovative structures put in place where a lot of these funds are being deployed into production mostly in the mining sector, for example the structures that target chrome. We have seen an increase in chrome production and exports through Applebridge,” he said.
“A number of firms are benefitting from the cheap financing that is coming from unlocking these RTGS balances.”
Besides benefitting the local productive sectors, the move by the central bank to ‘sweat’ the disproportionate levels of RTGS balances is critical in preserving the integrity of the country’s national payment system (NPS), which is vital in facilitating trade.
In this respect, the RBZ negotiated (and commenced drawdown last month) for a $600 million nostro stabilisation facility from Afreximbank to cope with the cyclical nature of the country’s foreign exchange receipts as tobacco – the top foreign currency earner – is traded during the first half of the year.