Tawanda Musarurwa Senior Business Reporter
The Reserve Bank of Zimbabwe (RBZ) says financial institutions should prioritise foreign currency allocation to productive sectors of the economy as a key response to the coronavirus pandemic.

In a strategic use of the monetary policy to cushion the blow of the current lockdown on critical manufacturers and other important players, the central bank — through the Exchange Control Circular 5 of 2020 — has directed banks and bureaux de change to prioritise forex to the productive sectors and suppliers of “goods and services not readily available in Zimbabwe”.

With the Covid-19 pandemic seriously affecting the country’s external trade and the resultant lockdown affecting local companies’ capacity to produce, Government intervention is critical in ensuring that the country is able to manage foreign reserves to adequately finance essential imports of raw materials, food, energy, medicines and other basic materials in the short-to-medium term. In terms of the new priority list, Category 1 firms should be allocated 70 percent of all forex payments, while Category 2 will get 30 percent.

Said RBZ director of Exchange Control Farai Masendu: “Consistent with Exchange Control Circular 3 of 2020, Authorised Dealers and Bureaux de Change are advised that the. . . priority list for foreign currency payments shall apply with immediate effect to ensure that foreign currency resources are substantially channelled to the productive sectors of the economy in light of the Covid-19 pandemic.

“Compliance with this requirement is critical to ensure that the economy responds positively to the enhancing of production in the country.”

According to Exchange Control Circular 5 of 2020, forex payments that will fall under Category 1 include: importation of raw materials, machinery and spare parts for local industry; imports of food stuffs, fuel, health and agro-chemicals not available in Zimbabwe; packaging materials, mining consumables, goods and services not locally available for tourism operators, medical fees and loan repayments, as well as payments for services not available in the country.

Other Category 1 items are remittance of pension income for non-resident Zimbabweans; remittance of rental income for properties financed from offshore, commercial vehicles, as well as university and college fees.

The RBZ initially set a prioritisation list for firms and/or entities that will be able to access foreign currency at the inter-bank foreign exchange market last February in a Monetary Policy Statement (MPS).

It was this particular MPS that announced the introduction of an interbank foreign exchange market.
The lockdown has created serious value chains disruptions resulting in some cases serious shortages of basic food items and other essential commodities in shops countrywide.

Zimbabwe also relies more on some imported finished and semi-finished products required by local industries and the lockdown in other jurisdiction, have resulted in many informal traders failing to travel to foreign markets to secure the products.

Other countries the world over have announced some huge bailouts to save their industries, especially the small scale sector from collapsing as they their incomes were eroded as a result of the lockdown.