Banking - The Reserve Bank of Zimbabwe has slashed the minimum limit of external loans for which approved financial institutions do not require prior exchange control approval (to facilitate into the country) from US$5 million to US$1 million.
Banks have already received the directive contained in the Exchange Control Circular No. 1 of 2013. The central bank said the new threshold and guidelines on external loans approval and payment were with immediate effect.
"Authorised dealers are hereby advised that the approval limit of external loans and/or trade credits has been reviewed from US$5 million to US$1 million with immediate effect," RBZ said in a circular to banks dated February 8.
"All external private or public loans from US$1 million and above shall now require prior External Loans Co-ordinating Committee approval," the central bank said.
The RBZ said all external loans and/or trade credits below US$1 million and whose terms are consistent with the ELCC Guidelines, shall be processed and granted formal approval at authorised dealer level and assigned a reference code.
"Declaration of all external loans (below and above US$1 million thresholds) shall be made on the "EC Form 2L and shall be given appropriate reference numbers.
"Such declarations shall be made, as indicated . . . above on a monthly basis, including those with nil transactions (disbursements or payments)," the bank said.
Repayment of principal and interest on all external loans approved by ELCC or registered with exchange control authorities do not require prior approval.
The central bank said to ensure that external debt contraction is consistent with the macroeconomic and financial position of the economy, the external loans co-ordinating committee is also mandated to approve and register public sector loans.
"Authorised dealers are therefore advised that external public sector loans are required to have prior ELCC approval before the repayments are effected.
"Authorised dealers, when requested to do so, may facilitate the registration of the public sector loan to ELCC or such registration may be made directly by the responsible Ministry/Authority . . . Authorised dealers will be required to quote the registration reference number when effecting transactions," the RBZ said.
The bank said to improve the utilisation rate on external loans, approved institutions dealers should negotiate, where possible, better terms and conditions.
Where offshore loans have been successfully drawn down, authorised dealers shall ensure that borrowers utilise the loans for the intended and approved purpose.
As enunciated in the Foreign Exchange Guidelines, ECD1 of 2009, all loan repayments shall continue through authorised dealers without referral to the Reserve Bank, provided ELCC authority has been obtained or the loan has been registered by the authorised dealer, if the loan is below US$1 million.
"Authorised dealers are advised that failure to register any offshore loans on their books, as well as effecting repayments for loans not properly registered, is a violation of Exchange Control Regulations," the central bank said.