Mnangagwa's govt bans US$

 Mnangagwa's govt bans US$
Published: 25 June 2019 (111 Views)
GOVERNMENT has discontinued the use of the multi-currency system while declaring the Zimbabwe dollar (ZW$) - abandoned about 10 years ago - as the only official trading currency, the Daily News can report.

The multi-currency system was adopted in February 2009 after the ZW$ had become worthless due to hyperinflation which, according to the International Monetary Fund, had scaled past 500 billion percent.

In the intervening period, government has been hesitant to reintroduce the ZW$, frolicking from one surrogate currency to the other.

But in an extraordinary Government Gazette issued yesterday, the multi-currency regime is now dead and buried.

"It is hereby notified that the minister of Finance and Economic Development has, in terms of section 64 as read with section 44A of the Reserve Bank of Zimbabwe Act [Chapter 22:151), made the following regulations… these regulations may be cited as the Reserve Bank of Zimbabwe (Legal Tender) Regulations, 2019.

"Subject to section 3, with effect from the 24th June, 2019, the British pound, United States dollar, South African rand, Botswana pula and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.

"Accordingly, the Zimbabwe dollar shall, with effect from the 24th June, 2019, but subject to section 3, be the sole legal tender in Zimbabwe in all transactions," reads part of the Statutory Instrument (SI) 142 of 2019.

The effect of the instrument is that from yesterday only the ZW$, whether in the form of bond notes or coins or electronic currency, are legal tender in Zimbabwe.

All other currencies are no longer usable as medium of exchange for local transactions.

SI 142 is, however, not intended to affect Nostro FCA accounts and the use of foreign currency (forex) in those accounts to make payments overseas, nor does it affect the obligation to pay duties and taxes in forex where required under the Customs and Excise Act and the Value Added Tax Act.

It is also permissible to tender any of the foreign currencies for international airline services.

Recently, President Emmerson Mnangagwa indicated that the country was in the process of introducing its own currency by March next year to stabilise skyrocketing prices and disparities between wages and the cost of living as well as getting rid of the black market, which has been causing currency distortions.

The surprise announcement came as the RTGS$ dollar was being resisted by traders because of its alarming loss of value with the USD becoming the currency of choice in what economists call dollarisation.

As a result, workers were now agitating for USD salaries, with those in the public service threatening to down tools.

Finance minister Mthuli Ncube yesterday said government had to take this measure to stop the market from self-dollarising.

"A few days ago, I had a meeting with the association of teachers in this country, which is a union, along with other ministries and they made it very clear to us that the multi-currency regime has become a US dollar regime," he said.

"They don't earn USD; they cannot afford to buy things in shops, pay for medicines while the hospitals and clinics are demanding USD. Quite clearly it became… necessary for government to move a lot faster to introduce a mono-currency regime with a domestic currency."The domestic currency currently comprises the RTGS dollar as before as well as the bond note and bond coins as before, so nothing has changed really, in terms of what we are calling domestic currency," added Ncube.

The Finance minister said all that has changed is that the only legal domestic tender at the moment is now the ZW$, which means that anyone who wants to transact in Zimbabwe has to go to the bank, or bureau de change to change their foreign currency into domestic currency and spend which-ever way they want to spend.

"That is what normal countries do… So Zimbabwe is joining the rest of the world in having a domestic currency for domestic purposes. This move is really beginning to restore full monetary policy and will give our central bank RBZ flexibility in conducting monetary policies.

"You will see a raft of measures coming out of the central bank going forward all designed to support the value of the currency," he Ncube.

Meanwhile, RBZ governor John Mangudya has implemented measures to buttress and strengthen the ZW$.

As part of the measures, the central bank has directed banks to transfer to it the RTGS$/ZW$ that they are holding as counterpart funds for the foreign currency historical or legacy debt that government, through the RBZ, is assuming at the rate of 1: 1 between the RTGS$ and the US$.

"This measure is expected to mop around ZLW$1,2 billion from the market by the end of this week," Mangudya said in a statement issued late yesterday.

The bank also adjusted the interest rate on the RBZ overnight window upwards from the current 15 percent per annum to 50 percent per annum in line with inflation trends.

It also removed administrative limits on the operation of bureaux de change and on the cap on margins for banks for interbank foreign exchange transactions.

Last but not least, it put a vesting period of 90 days on disposal of dual listed securities or shares purchased by investors on the Zimbabwe Stock Exchange, while increasing the supply of foreign currency into interbank foreign market by ensuring that at least 50 percent of the surrender portion of foreign currency is sold to the interbank market.

"This will be supplemented by the use of Letters of Credit (LCs) for the importation of essential commodities that include fuel, cooking oil, and wheat. The bank has put in place LCs amounting to US$330 million for this purpose," added Mangudya.

- dailynews

Tags: Mnangagwa,
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