Government has removed the multi-currency regime and
restricted domestic transactions to local currency, renamed Zimbabwe dollar, in
an effort to enhance the affordability of goods and services by the majority.
Finance and Economic Development Minister Professor Mthuli
Ncube yesterday told The Herald that Government had taken the decision abandon
the multi-currency system after noting that the market was choosing to price a
number of goods and services in US dollars when the majority of citizens earned
the local unit.
He said apart from enabling everyone to transact, those
with and without access to foreign currency, the new measures would give the
Reserve Bank of Zimbabwe (RBZ) full monetary policy control to defend the value
of the domestic currency.
Prof Ncube said key fundamentals to support a local
currency, including controlled Government expenditure and budget surpluses,
were now in place.
“Basically, we have made another step forward by moving
away from a multi-currency regime to a mono-currency regime where the domestic
currency (Zimbabwe dollar) is now the sole legal tender for transactions within
Zimbabwe,” said Prof Ncube.
“What was happening out there in the market was that the
market was choosing a mono-currency, being the US dollar, and that is untenable
because we do not control the sourcing of it (and) the supply of it.
“We cannot even conduct monetary policy on the back of it.”
The departure from the multi-currency regime dovetails with
President Mnangagwa’s remarks in an interview with Bloomberg in Mozambique last
week that it was necessary to have currency reforms in the country.
Talk of a reverting to local currency has also been
insistent over the past year as Government has taken pragmatic steps to finally
move to a new local currency.
Essentially, the latest move is arguably a penultimate stop
before the adoption of the fully monetised local unit.
Yesterday, Prof Ncube said using the Zimdollar would make
it easier to transact on the domestic market with forex reserved for external
payments.
“We also know that in some quarters we were not even
allowed to transact in US dollars because of things like sanctions and other restrictions.
So, it’s necessary to move on and use a currency that you can control.
“And also, what we are trying to do is restore full
monetary policy where the Central Bank can conduct monetary policy using the
array of tools that are necessary for managing monetary policy such as interest
rates, use of a monetary policy committee to govern things like targeting money
balances or even targeting inflation,” he said.
Prof Ncube said people will use the existing RTGS dollar,
bond notes and bond coins, which means “nothing changes really”.
“What changes is the name of the currency (to Zimbabwe dollar) plus the fact that it is
now the only legal tender in Zimbabwe,” he said.
Prof Ncube said the use the Zimbabwe dollar is expected to
result in an increase in US dollars flows into bureaux de change and banks as
people convert their money to transact.
He added the new measures speak to discussions Government
recently had with its workers.
“Basically, the multicurrency regime, which had by the way
become a mono-currency in favour of the US dollar, was favouring those with
access to US dollars; those with access to US dollars were facing no change in
inflation at all for the last three years.
“So we were now creating a society of haves and have-nots;
those who have access to US dollars and those who don’t. Those who don’t are
faced with RTGS inflation while those who have US dollars are faced with zero
inflation.”
Through Statutory Instrument (SI) 142 of 2019, known as
Reserve Bank of Zimbabwe (Legal Tender) Regulations, Government abolished the
use of multiple currencies such as British pound, United States dollar, South
African rand, and Botswana pula, among others.
Zimbabwe had used a basket of currencies since 2009. The Zimbabwe dollar became the sole legal tender with
effect from yesterday.
It will have same boundaries, extent in space, time, or
meaning as the RTGS dollars, which entails all bond notes and approved forms of
electronic money in Zimbabwe.
However, nothing changes regards operation of foreign
currency (nostro) accounts, which will continue to be designated in the
currency they are held. Herald
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