Zimbabwe’s monetary and fiscal authorities have put in
place measures to ensure enforcement of Statutory Instrument 142 of 2019, which
effectively ended the multi-currency system and determined the “Zimbabwe dollar”
as the sole legal trading currency in the country.
Last Monday, Treasury moved in to supplement the ongoing
currency reforms by outlawing the use of foreign currencies for local
transactions. However, indications are that there were some retailers and other
economic players that have insisted on demanding payments in United States
dollars.
Appearing before the Parliamentary Portfolio Committee on
Budget and Finance yesterday, Reserve Bank of Zimbabwe (RBZ) governor Dr John
Mangudya, said the enforcement strategies are already in place.
“There are many tools of enforcing Statutory Instrument 142
of 2019, including the Bank Use Promotion and Suppression of Money Laundering
Act (Chapter 24:24), which was approved by the Parliament of Zimbabwe, the Financial
Intelligence Unit (within the central bank), and members of the police force
who are already seized with the matter to ensure that at least there is
compliance and indeed enforceability of this matter,” said the governor.
“Enforcement is very possible and they have already started
doing so to ensure that all local payments are made in the Zimbabwe dollar, and
that payments offshore are done in US dollars.”
The Bank Use Promotion and Suppression of Money Laundering
Act (Chapter 24:24), in particular is a law that promotes the use and
suppresses the abuse of the local financial services system.
The re-introduction of the Zimbabwe dollar has been
welcomed even from international quarters, with the International Monetary Fund
(IMF) recently saying that the “adoption of the Zimbabwe dollar as sole legal
tender is a sovereign decision by the government of Zimbabwe”.
Meanwhile, the RBZ governor told the committee that
individuals are still allowed to withdraw up to US$1 000 a day from their
foreign currency accounts (the individual FCAs) without restriction.
Following on the move to make the Zimbabwe dollar the sole
trading currency, the RBZ last week came in with a raft of measures to
strengthen the value of the local currency, including directing local financial
institutions to transfer to the central bank the local currency that they are
holding as counterpart funds for the foreign currency historical or legacy debt
that Government, through the Reserve Bank, is assuming at the rate of 1:1
between the ZWL$ and the US$.
Dr Mangudya again reiterated that the said move is targeted
to mop around $1,2 billion from the market as it seeks to control inflationary
pressures.
He also said the move to put in place Letters of Credit
(LCs) to the tune of US$330 secure importation of basic commodities would take
away pressure from the interbank market.
Analyst Persistence Gwanyanya supported the latest
Government move adding supporting Zimdollar strength and stability today
requires a two-pronged approach including currency sterilisation.
“This involves sterilising
the Zimdollar (mopping up Zimdollar liquidity), and improving the supply
of forex in the interbank market. RBZ has already started the exercise when it
instructed banks to transfer Zimdollar $1,2 billion to it in respect of legacy
debts that it is assuming.
“This occurs at a time when usable balances are around zwl$1,2
billion, which will result in massive reduction of Zimdollar liquidity.
“Supported with a high interest rate regime occasioned by
increase in bank rate from 15 percent to 50 percent, this adjustment will
curtail speculative borrowings, which eases pressure on forex.
“And, those who borrowed to invest in forex will be forced
to unwind their US$ positions but at a depreciating rate resulting in US$
sell-off,” he said.
This will increase forex flow in the interbank market
making it more liquid and accessible noting that we currently have about US$1
billion sitting in FCA accounts.
As the market starts to see positive adjustments, confidence is boosted, which suppresses the
parallel market and stabilises the situation. Herald
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