THE Financial Intelligence Unit (FIU) has frozen Harare City Council (HCC)’s foreign currency accounts for charging prices exclusively in foreign currency and using parallel market rates, as part of a crackdown on local authorities involved in illicit financial transactions.
This is part of a raft of measures the FIU will continue to
implement to maintain prevailing market stability that has seen the official
exchange rate edging closer to converging with the parallel market rate.
HCC and other municipalities have been under investigation
for going against the law by pegging prices in foreign currency without giving
ratepayers the option of paying in local currency for some services.
In an interview, FIU director-general Mr Oliver Chiperesa
said the net is closing in on all non-compliant local authorities.
“We have frozen the Harare City Council US dollar accounts.
In terms of the law, they are expected to allow the public to pay in either
currencies, but they are having a practice where they are insisting on US
dollar payments without the option of paying in Zimbabwe dollars for some
services. We have been engaging them, to bring them to order,” Mr Chiperesa
said.
He said the FIU wants to send a clear message to public
institutions that they should be at the forefront of following the law.
“So we are going to be targeting public entities, not only
those refusing to accept the local currency for certain services, but also
businesses that are charging using parallel market rates. There’s no excuse for
anyone, especially public institutions,” he said.
Economists have projected that the local currency will stabilise
at US$1 to $600, which will be the convergence rate for the parallel market and
the official rate.
Member of the Reserve Bank of Zimbabwe (RBZ) Monetary
Policy Committee Mr Persistence Gwanyanya said as the local currency moves
towards stability, businesses will be forced to bring down prices.
Mr Gwanyanya said the Government will increase demand for
the Zimbabwe dollar to achieve durable stability.
“This is necessary to minimise the risk of dollarisation as
the local currency supply remains tight. The appetite for the Zimbabwe dollar
by the Government, which commands more than 70 percent of the market, increases
and business should, sooner rather than later, realise that the honeymoon is
over and revise down their prices. It seems the local currency will stabilise
at US$1: $600,” Mr Gwanyanya said.
He said the honeymoon is over for those who have been
riding on speculative activities and currency manipulation.
“Government is determined to support the local currency and
make it a currency of preference. There should be no going back on the current
stability measures as stability is good for everyone. The honeymoon is over and
business needs to go back to basics where productivity, not speculation or
arbitrage, is key,” he added.
Harare-based economist Dr Kingstone Kanyile said stability
will be maintained if the Government continues to keep a tight leash on money
supply.
“As long as we have demand coming through without much
supply, we will stabilise at $600-$700 per US$1. Efforts by the Government to
stabilise the exchange rates are most appreciated. Naturally, parallel market
rates fall when there are less dollars in terms of local currency. Government
has closed the tap for now.” Sunday Mail
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