Reserve Bank takes over foreign currency accounts

By Lance Guma
17 October 2007

A mid-year monetary policy announcement by the Reserve Bank, effectively taking over foreign currency accounts held by exporters and NGO’s, is now being implemented. Last week some banks, including Barclays, sent out circulars to their corporate clients indicating that all foreign currency accounts held by exporters and NGO’s were now under the Central Bank. This means all transactions made by forex account holders need the approval of the Central Bank. More worrying is that banks like Barclays have issued disclaimers saying they will not be held liable for any delays or claims not met.

Economic analyst Bekithemba Mhlanga says the move by government is meant to monitor foreign currency inflows into the country. However he believes they are shooting themselves in the foot, as the controls will discourage people from using the system. He predicted shrinkage in forex inflows into the country as people resort to other informal channels. Mhlanga says attempts to sweeten the takeover by offering high interest rates were not enough to build confidence in the system. In previous years government has unilaterally raided all foreign currency accounts without warning. This time they have targeted exporters and NGO’s.

South African based businessman Mutumwa Mawere has in the past accused government of raiding foreign currency accounts to pay off arrears with the International Monetary Fund. Mhlanga says there is credibility in those claims and the new system implemented allows them to do exactly that.