Highlights of monetary policy statement

HARARE - These are the main points from RBZ governor Gideon Gono's monetary policy statement:
* "Project Sunrise", which is largely focused on SME development and the removal of 3 zeroes on the currency from August 1 through the introduction of a "new family of bearers cheques". 21 days to cha

nge to new family of bearers cheques.
* “Zero to hero” marketing campaign, which involves the replacement of currency.
* Cents reintroduced, but are in note form.
* Holders must produce source of bearers cheques funds if in excess of $100 mln for individuals or $5 bln corporates. If cannot produce evidence of source of funds, cash will be deposited into “anti-laundering bond” for 2 years at 0%.
* Daily cash withdrawal limits to be restricted to: Individuals $100 000 ($100 mln in old bearers cheques) Corporates $750 000 ($750 mln in old bearers cheques). RBZ will be carrying out “measures” to make sure asset prices will be properly rescaled.
* All payments of more than $1 mln will be monitored by RBZ anti-monitoring laundering.
* Border posts will be manned by Zimra, ZRP and “youths” to investigate the “illegal” export and import of local currency. Says this is because the authorities can only account for $10 trln of the $43 trln in circulation. The rest in “the mini-central banks” and apparently $20 trln “doing business in the other country”.
* Anyone caught with currency in excess of $5 mln will be prosecuted.
* Interbank exchange rate moved to $250:US$1 ($250 000 in the old bearers cheques) in the interim.
* Exchange Rate Impact Assessment Board made up of broad-based group of unnamed individuals. No indication of how the rate will be set, but “patriotism” the key aspect.
*Secured accommodation rate dropped to 300% from 850%. Unsecured accommodation decreased to 350% from 900%. Stat reserves decreased further.
* Demand and call deposits dropped to 40% from 45%, building societies to 30% from 35% and finance houses to 15% from 20%. Banks must “reciprocate” by redeploying to productive sectors. RBZ will “dictate measures” if banks are being “impervious” to lending. Banks must roll over Aspef funds for the next 12 months.
* Gold companies now allowed to retain 75% in gold proceeds in FCA from 40% currently. Gold support price abandoned, and will receive international price at “the ruling market exchange rate”.
* Exporters to retain 75% of earnings in FCA from 70% previously.
* Tobacco Performance Research and Development Facility will award 65% of sale value delivery price at the old exchange rate at the end of August. This is over and above the 35% already given.
* Farmers given 15% FCA retention facility with no liquidation or expiry limits.
* Concedes there has been quasi-fiscal expenditure due to the usual reasons, corruption, etc, and “extraordinary intervention” is required to address the “further deterioration of infrustructure and parastatals”. NRZ is “leading the revival of parastatals”. Some are still “hopeless cases”.
*Creation of $16 trln ($16 bln at old bearer cheque rate) SME Development Fund to loan money at 70% to construction projects, mining, and others. Fund split on provincial lines and demographic areas and will “benefit 2 mln people”.
* A2 farmers will no longer be allowed to have fuel at subsidised rates.
* Forex inflows in half year to June 30 are up 15.2% at US$961 mln (US$834 mln). US$340 mln came through the RBZ and the balance into company’s FCA from exports. Foreign debtors as of July 25 amounted to US$223 mln, which should be realised over the next 90 days.
* Gold deliveries declined 31% in half year to June. 2005 deliveries amounted to 13.4 tonnes from 21.3 tonnes in 2004.
* Platinum remained a “success story”. Details included in his full statement.
* Concedes there will be need to import maize “but deficit is not as large”.
* Details the “3 vices” – indiscipline, corruption and speculation – and adds a 4th: “bureacratic sloth and inertia” that keep throwing up “unnecessary road blocks” place an “intolerable burden on the economy”. Has not been enough resources to fight “corruption”.
Gono said that by December 2008 through the aggressive “National SME programme”, Zimbabwe will achieve:
– single digit inflation
– secure and stable financial sector
– a strong currency, “market driven” exchange rates
– single digit unemployement
– will have food, fuel and power self-sufficency, and “export surpluses”
– paying off arrears.

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