Zim’s new measures for importers to declare sources of forex

In Zimbabwe, the government has implemented new reforms in the interbank foreign exchange system in an attempt to regulate the buying and selling of foreign currency. These reforms have introduced an official market for the trade of foreign currency. To shed light on the new measures applicable to importers in Zimbabwe, CNBC Africa interviewed Batanai Matsika, Head of Research at Morgan & Co. The conversation delved into the requirement for importers to disclose the sources of their foreign currency. Matsika expressed the importance of ensuring that importers obtain their foreign currency through legitimate means to deter participation in the parallel market, which often deals with illegal activities. While the new measures aim to eradicate the parallel market, the reality on the ground paints a different picture. Despite the introduction of the interbank foreign exchange system in February 2019, the rates in this official market remain controlled, and there is a limited supply of foreign currency. This scarcity has led many businesses to continue sourcing foreign currency from the parallel market. There have been allegations in the past that the Reserve Bank of Zimbabwe itself participated in the parallel market. Although these suspicions persist, there is a growing concern about the lack of liquidity in the official foreign exchange market. While the official market has seen some increase in supply, these developments have not been sufficient to meet the demand for foreign currency. The interview also touched on the potential implications of cracking down on importers who fail to declare their sources of foreign currency. Matsika highlighted the risk of shortages in various goods if import regulations were enforced strictly. As a result, the government may need to strike a balance between monitoring foreign currency sources and preventing shortages of essential goods. Given the uncertainty in the foreign exchange market, Matsika suggested that investors consider investing in Old Mutual shares. Old Mutual is seen as a hedge against fluctuations in the exchange rate and has unique attributes that make it an attractive investment option. Its fungible nature, listing on multiple exchanges, and international operations make it a relatively stable asset amidst the currency challenges in Zimbabwe. In conclusion, while the new measures for importers to declare sources of forex aim to formalize the foreign exchange market and curb illicit activities, there are challenges in practice. The dynamics of the foreign exchange market, coupled with the limited liquidity in the official market, present obstacles to fully transitioning away from the parallel market. As Zimbabwe continues to navigate these reforms, a delicate balance between regulation and market stability will be crucial for the country's economic outlook.