RBZ snubs forex auction bidders

Source: RBZ snubs forex auction bidders – The Standard

THE Reserve Bank of Zimbabwe (RBZ) will not reverse its decision to pay outstanding forex auction allotments as non-negotiable certificates of deposit (NNCDs) to keep the money supply in check, it has been revealed.

A NNCD is an acknowledgment that the issuer has received a sum of money and made a promise to repay the sum of money other than a deposit account or negotiable instrument. However, an NNCD cannot be cashed in before maturity.



As the Zimbabwe market adapts to the yet another currency, Zimbabwe Gold (ZiG), the RBZ has availed US$285 million to shore up the local currency.

The central bank refusing to payout the forex auction allotments would impact reserves and money supply and this is why the unpaid allotments were converted to ZiG to be paid out as NNCDs. These payouts are occurring as the forex auction has been closed.

This conversion of the allotments will use the available exchange rate with a maturity of 24 months and an interest rate of 7,5% per annum.

However, industry has raised concerns about this move as some of this money is working capital and remains significant to their continued liquidity.

“On NNCDs, we had to lock the money up. I would rather inconvenience a few comrades than jeopardise the whole economy,” RBZ governor John Mushayavanhu said at a Confederation of Zimbabwe Industries (CZI) Monetary Policy Review and Economic Business Outlook Symposium last week.

“So, be it unfulfilled auction rate obligations or those issued by banks and so on, we are hoping to keep them as NNCDs.

“I’m sorry, but we are not going to budge. When we talk about confidence in the economy, it is not something that can be legislated. So, we will think about it but definitely not now.”

In his inaugural monetary policy statement, Mushayavanhu said the bank would continue with its tight monetary policy stance with excess liquidity being mopped through the issuance of NNCDs.

The bank tightened the open market operations to mop-up excess liquidity by introducing seven, 14, 21, and 31-day maturity brackets for NNCDs in August 2023.

“In this regard, the level of NNCDs fluctuated between $525 billion and $1,1 trillion during the past eight months,” Mushayavanhu added.

“Further efforts to manage liquidity saw the bank issuing RBZ instruments as collateral instead of cash cover for foreign currency structures undertaken with banks.”

However, the industry raised concerns that converting the allotments to NNCDs would be problematic as some of the bidders were hoping to use this money as working capital, and others for liquidity.

“In terms of fairness, we are not sure whether it’s fair, but obviously to our members it may not be fair as suggested because some of it is short-term working capital and it is going to hit those businesses,” CZI president Kurai Matsheza said.

“So, again this is a matter that we will continue to engage.”

CZI represents the largest bloc of manufacturers in the country.