Foreign Currency Deposits Hit $92 Billion As RBZ Auction Pays Dividends

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By Alois Vinga

TOTAL foreign currency deposits held in banks have reached $92 billion, sustaining an upward trajectory on the backdrop of the Reserve Bank of Zimbabwe (RBZ) foreign currency auction system.

Launched in June this year, the auction system, coupled with stringent measures on mobile money transfer platforms has so far managed to arrest spiralling exchange rates and achieve price stability.

Exchange rates have maintained premiums of around $81 for every US$1 for over three months while availing foreign currency for raw material support to companies.

Additional measures taken by the central bank which allowed the use of free funds in settling local transactions have further restored confidence prompting a surge in foreign currency deposits.

The latest RBZ Monthly Economic Review for the period ended September 30 notes that Currency Account Deposits (FCA) surged to an equivalent of ZW$92.11 billion.

“The growth largely reflected valuation changes due to exchange rate movement, from $15.20 per US$1 in September 2019 to $81.44 per US$1 in September 2020,” the report said.

For the month of August 2020, FCA deposits stood at an equivalent $86.01 billion as a result of increasing deposits.

“Over the year to July 2020, the foreign currency component of total deposits increased significantly, mainly on account revaluation adjustments due to exchange rate movements, from ZW$9.19/US$ in July 2019 to $76.76/US$,” the report said.

In addition, the growth in FCA deposits during the period also reflected inflows from the tobacco-selling season, as well as the policy change that allowed usage of free funds for domestic transactions.

In the month of June 2020, Foreign Currency Account deposits stood at an equivalent of ZWL79 billion.

The latest figures indicate significant recoveries from the declines recorded in the last quarter of 2019 when FCA deposits went down from 42% in September 2019 to 39% in the month of October 2019.

The deposits reached a huge decline in the month of December 2019 reaching a 34% mark.

The recorded declines corresponded with policy shifts made by government last year under Statutory Instrument 142 which paved way for the Zimbabwe dollar as the sole legal tender in any transaction in Zimbabwe.