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Posted on 04 February, 2019 at 13:14

By Luxon Kalonga

Yesterday, the 15th of October 2018 marked the deadline for banks to have completed their classification of existing client bank accounts between Nostro FCA and RTGS FCA. This requirement came as part of the Monetary Policy Statement published on the 1st of October that brought pandemonium to the economy of the past two weeks. Zimbabweans felt a sense of dejavu about the splitting of the bank accounts as they remembered the 2008 “casino economy” days. Those with huge balances in their bank accounts sought the safe haven greenback as they envisaged that their bank balances would soon become worthless. Market forces of supply and demand pushed the USD/”RTGS” parallel market rate to as high as 7.0! Retailers tried to catch up with the depreciating plastic money balances by hiking prices and some just could not cope with it and decided to close indefinitely for “renovations”, “stock-take” and other obviously ridiculous reasons. The Finance Minister Mthuli Ncube came in to quell market jitters by making further clarifications on the policies brought by the Monetary Policy Statement.

In this article, we look at the impact of the minister’s clarifications and their impact on the operation of the Non-Profit Organisations sector.

Nostro and RTGS Accounts

Despite the insane parallel market rates, Prof Mthuli Ncube confidently clarified that the bond notes and Real Time Gross Settlement (RTGS) remains at par with the US dollar, hence calming down the speculation that an official USD/”RTGS” rate would soon be published. Almost simultaneously, the parallel market rate also dissipated to around 1.8 as the USD buyers felt it was not prudent to continue buying the hard currency at the crazy rates.

The Reserve Bank of Zimbabwe (RBZ) issued Exchange Control Directive RT120/2018 directing banks on how to proceed with implementing the Monetary Policy. The directive defined different types of Nostro Accounts that can be opened by the banks as given below:


Therefore, NGOs need to have two different types of Nostro FCA accounts – No. 7 (NGOs Embassies and International Organisations FCAs) and No. 4 (Domestic Nostro FCAs). The former would be specifically for accounts where inflows would be coming from foreign funding partners whilst the later would cater for hard currency inflows from local sources such as local funding agencies and hard currency cash deposits. NGOs should also encourage their employees and other beneficiaries to also open Individual Nostro FCAs. The key advantage with the Nostro FCAs is that money will not lose its identity as hard currency even if it is moved across banks as long as the source and recipient accounts are Nostro FCAs. Before the introduction of Nostro FCAs, money would only be recognisable as hard currency in the bank account where it was originally received. Upon transfer into the next account it would be diluted with RTGS money and hence lose its identity.

Therefore, money in NGOs’ Nostro FCAs will be an important bargaining chip for obtaining competitive prices from suppliers. We foresee a situation where the majority of organisations will join the Nostro FCA bandwagon in order to access foreign currency. The economy will be effectively dollarised again!

NGOs should also open RTGS FCAs for their local activities such as RTGS donations, fundraising and other income generating initiatives. These ones will however be affected to a greater extent by the volatility in the market. Because of the unitary official USD/’RTGS’ rate, NGOs can utilise these balances to pay off statutory obligations (except capital gains tax on Nostro-based property sales), rates, electricity and other administrative costs. It would be prudent to maintain all reserves in Nostro FCA accounts.

Retention Thresholds

The RT120/2018 directive also reinforced the fact that all sectors (including NGOs) will continue to retain 100% of foreign currency receipts in their Nostro FCAs, with the exception of miners and producers of key agricultural produce.

This effectively means that foreign currency will be available on demand. Unlike the previous scenario where NGOs needed to write letters applying for withdrawals, it should be fairly easy to go to the bank and withdraw foreign currency.

Transfer Tax

There was also further clarification on the 2% transfer tax. The tax will only apply for a minimum transfer of $10 and the tax will be a capped at $10,000, meaning that transfers higher than $500,000 will attract a flat tax of $10,000.

Transfer of funds for payments of salaries, taxes, intercompany transfers and all Nostro FCA transfers will be exempted from the 2% transfer tax. By encouraging suppliers to open Nostro FCA accounts, NGOs will therefore be able to avoid the 2% tax since the majority of payments will be in foreign currency. This will come as a relief on NGO budgets which were going to be strained by huge bank charges.



It is important for NGOs to keep their donors updated on the current monetary environment trends and approach their bankers for further clarity on opening the various Nostro FCA accounts and other implications such as bank charges.

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