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Some Banks Buying USD Above Black Market Rates, Interbank Market Heating Up

RBZ, Central bank Zimbabwe, Zimbawean Financial Institutions, Monetary Policy Committee

It’s early days yet with all this ‘new Zim Dollar’ and forex ban stuff. However, today the exchange rate between local currency and other currencies like the USD is an interesting story.

The black market rate has fallen

When we say fallen we mean that you get less local currency per USD. At peak on the 25th of June, a few days ago, the black market rate was at 13.5 meaning you would get RTGS$13.50 for every US Dollar.

Today, the word on the streets is that the rate is around 8.5. This is a result of the recently announced currency ‘reforms.’

The interbank market heating up

The interesting stuff is happening in the interbank market though. Some banks are no longer being conservative in their bid to acquire foreign currency from the market.

First Capital Bank has the highest buying price we have seen so far. When we checked just after 12 noon, they were buying at 8.69560 and selling at 9.14160 giving a mid rate of about 8.9. This is above the general black market rate.

Of the banks we checked, FBC had the second highest rate. They were buying at 7.142 and selling at 7.5 which gives a mid rate of about 7.3. Considering the risks associated with the black market, this is a reasonable rate and can probably lure people away from the informal market.

Other banks are still being conservative

We didn’t check with all banks. However of the banks we checked with, the majority are still in the region they have been in the past few days. NMB Bank is around 6.5 so is ZB and Steward Bank, CBZ around 6.1…. The average rate on the interbank market according to the Reserve Bank of Zimbabwe at the time of publishing is 6.5432.

This shows that First Capital Bank and FBC are ahead of their peers by a big margin and their peers are pulling the average rate down. We expect the competition to increase though and this may cause the interbank market exchange rates to go even higher.

So what?

If true market activity starts to happen on the interbank market it may limit the black market effectively. Why would anyone risk changing currency on the black market when the rates on the official markets are good enough?

The flip side is still a problem. When one wants to access forex, can they readily buy it from the interbank market? The RBZ of course wants this to be true or at least for it to be perceived to be true. Their plan for this:

Increase supply of foreign currency into interbank foreign market by ensuring that at least 50% of the surrender portion of foreign currency is sold to the interbank market. This will be supplemented by the use of Letters of Credit (LCs) for the importation of essential commodities that include fuel, cooking oil, and wheat. The Bank has put in place LCs amounting to US$330 million for this purpose.

Exporters are mandated to surrender a portion of their forex earnings to the central bank for example manufacturers must sell 20% of export earnings to the RBZ and gold producers 45%. The central bank is saying they will in turn sell at least 50% of that money through the interbank market instead of holding on to it.

The other way they want to ensure there will be forex to buy on the interbank market is this:

Authorised Dealers are also reminded that the retention period within which an exporter is entitled to utilize their retained export receipts remains within 30 days from the date of receipt. As per Exchange Control Directive RU28 dated 22 February 2019, all unutilized balances shall after the 30 day retention period, be offloaded into the interbank market at the prevailing market exchange rate and reported to Exchange Control on the Daily Return on Interbank Trading Transactions

So yes manufacturers need only sell 20% of their export earnings to RBZ for example, they however can’t withdraw the remaining 80% as forex. They can use it to pay for goods and services abroad. However, they can only do this within a 30 day period. After 30 days whatever remains in their FCA is then automatically sold through the interbank market.

This one is the hard one to swallow. It will encourage issues like transfer pricing. That is, company A in Zimbabwe can ask its sister company B in Mauritius to sell services to it at very high fees so it can make sure all its forex goes out of Zim and not be changed into an unstable currency: the Zim Dollar.

Much of the plan with the multicurrency ban falls apart at this point. Mthuli Ncube and John Mangudya should extend good faith to businesses and assure them their money is safe, not to force them to keep their money in a reserve currecny as volatile as the Zim Dollar. As long as they insist on that, loopholes will be found and exploited and the Black Market will be financed by those same companies. AND we will be back full circle.

Trust is a two way street. The onus is on the authorities to extend it first. The whole economy does not owe the government any trust at this point because they have betrayed us countless times. The only way this will work is if the government itself trusts us first. Yes some shoddy stuff will still happen but as long as the government continues to keep its end of the bargain more and more will go the official route, at least I think so….

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15 thoughts on “Some Banks Buying USD Above Black Market Rates, Interbank Market Heating Up

  1. but read that slowly.. the banks are buying your USD, and giving you less RTGS. have they actually got USD to sell to you at 9.14? has anyone tried to buy USD yet?

    1. The difference between 9.14 and 8.69 is the banks commission and the availability of USD to buy will probably depend on the volumes they receive aswell as the RBZ promised supply.

    2. Yes Smartaz, you and I are expected to sell to banks… Good luck to us if we ever want some forex and we have a large sum in our Zim Dollar account…

      1. Yeah Tinashe thats exactly my point. im 100% sure if you go there to buy USD at that 9.14 rate right now, they will tell you they havent got anything to sell yet, and to come back in two weeks please.

        we’ve seen these moves before.

        1. they is no country in the world where you can just walk in and change forex in australia you need your passport and plane ticket proof of id and travel you where living in the wild

    3. thats a point you’re giving there. There is very high likelihood of rates shooting high up. And bankers happen to know the economy better.

  2. Agreed,…. the next few weeks are going to be interesting. Another bone of contention is when banks are buying this forex are they strictly buying from account holders or even walk in clients? Why I ask this is because walk in clients would want to change their forex for cash since they do not have any account for the funds to be transferred, and if they are offering cash is it the same rate as the RTGS/USD rate? If it is the same then it potentially means money has to be printed to sustain otherwise it means the black market will hang around for a little while longer.

    1. Hmm very good question there Dave
      There has been news that the RBZ wants to print $400 million worth of bond notes. I think this is a mistake. Better for banks to open those lite accounts for walk ins. They don’t require much in terms of KYC anyway

      The biggest driver of turbulence in the parallel market are businesses though. I think the best the RBZ should do is to make sure businesses have confidence in their system and it starts off at allowing them to keep their money in the currency they have earned it

      1. It’s not necessarily a mistake. If they print $400 million in notes and get rid of $400 million in RTGS electrnic balance then it could ease/end the cash shortages.

  3. RBZ systems confidence disappeared with the departure of Moyana!! Now its the wild wild west scenario.

    1. Well Moyana found a system that was sound. There was a lot of aid money flowing in under the ZIMCOD arrangement. Farming and manufacturing was at it’s peak. He only had to swim in a clean pool. Then ZANU continuously peed into the water and finally pooed into it by awarding $50K to war veterans. Not even a Moyana would have stopped cyclone Robert at that point. Then finally came the scorched earth policies post 2000 referendum!

      1. Very well said Mwalimu. It was progressive retrogressive fiscal policies of Robert Mugabe regime that got us to where we are. However I still have a question on our billion licence application of 2015. It would be better if these monetary policies were backed by a capacity for the country to sell our gold direct to the international market in the event we want to bolster our local currency when we run low on Forex. Selling our gold via Rand Refinery is not consistent with this new currency regime. Yrs Mukoma Don

  4. Actually had a foreign payment made, willing buyer willing seller at a the official rate of 7.32; it such a relief as we have been in the queue for months. This stuff is actually working….

    1. Yes working for now until the hyenas break into the goat pen.The culprits are within the the system and are the ones crafting the regulations leaving loopholes for them to exploit later or making some aspects of the system unattractive.

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