More reforms to bolster Zimdollar purchasing power
Mukudzei Chingwere-Herald Reporter
All Government agencies, including parastatals, will now collect fees in local currency, Government rather than the Reserve Bank will buy the 25 percent of foreign currency exporters are required to surrender, the auctions will be limited to US$5 million a week, and all retained export earnings unspent after 90 days will be liquidated in the interbank market.
The major set of reforms to maintain the purchasing power of the Zimbabwe dollar, ensure that Government can make debt repayments without increasing money supply, and ensure that export earnings reach the interbank market were announced yesterday by Finance and Economic Development Minister Professor Mthuli Ncube.
Over the last fortnight there has been a sustained attempt to collapse macro-economic stability, a key component for economic development, just as the country is stepping up towards the holding of harmonised elections later this year at a date to be announced by President Mnangagwa, showing that the country’s detractors are not relenting. The Treasury has taken radical steps to stop these efforts.
“All Government agencies including parastatals will substantially now collect their fees in local currency,” directed Professor Ncube. “Payments to Zesa by non-exporters will be made in local currency and all customs duty to be payable in local currency, with the exception of designated or luxury goods, and where the importer opts to pay in foreign currency,” he said.
Further to the announcement on May 2 that Treasury was taking over all external loans from the Reserve Bank, Minister Ncube also advised that with effect from June 1, Thursday this week, banks will no longer withhold foreign currency surrendered by exporters.
Instead Treasury will fund the 25 percent local currency component surrendered by exporters.
“Treasury will now fund the Zimbabwe dollar component of the 25 percent foreign currency surrendered by exporters, in order to eliminate the creation of additional money supply,” advised Minister Ncube.
“The foreign currency collected from the 25 percent that is surrendered, will now be collected by Treasury and used in servicing the foreign currency loans assumed from the Reserve Bank of Zimbabwe. Banks will no longer withhold any foreign currency surrendered by exporters, and all liabilities to the banks will be settled through Treasury.”
As a means to retain control of foreign currency payments Minister Ncube introduced a 1 percent tax on all foreign currency payments and maintained the US dollar cash withdrawal tax at two percent.
“Government shall create a debt redemption fund to service other external liabilities in line with the arrears clearance programme. These will be funded through new levies and other resource mobilisation initiatives,” he said.
At the same time the continuous build up of unused export earnings in private nostro accounts will end.
“All export proceeds that remain unused after 90 days will be liquidated onto the interbank market,” he said.
“The weekly auction will be limited to a maximum of US$5 million. As from June 1, 2023, winning bids at the auction will be paid within 24 hours of award. There will be tightening of monetary policy in order to reduce lending and hence money creation by banks,” said Minister Ncube.
While the Government’s fiscal discipline has stopped the creation of money supply by Government, the private banking sector through its lending policies has seen the money supply rise.
He said all manufacturers selling general goods, such as cement, milk, soft drinks, for the export market, will now be required to charge VAT, which is refundable by ZIMRA after exporting.
Minister Ncube said Government will continue to sterilise excess liquidity already injected into the economy through issuance of Treasury bills, whilst the Reserve Bank will also continue to sterilise through appropriate monetary policy tools.
With regards to externalisation of funds and transfer pricing, Government will strengthen surveillance and monitoring, complemented by a robust foreign currency payment system and information sharing system between financial institutions and ZIMRA.
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“Government will continue to review Civil Servants salaries and allowances in line with the above developments and policy measures, including increasing the threshold of the local currency IMT tax,” said Minister Ncube.