Govt wrestles with economy … as RBZ bids to stabilise escalating goods prices, forex rates

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IN A bid to stabilise the ever rising prices of goods and black market foreign exchange rates that are torpedoing the economy, authorities yesterday assured people with hard currencies that they were free to use their money as they wished, and that foreign currency accounts would not be raided, the Daily News reports.

This fresh move by the government to build confidence in the economy comes as many companies and individuals haveover the past few months been increasingly using the US dollar again for their transactions, on the back of the ever weakening local currency.

Unveiling his latest monetary policy statement in Harare yesterday, the governor of the Reserve Bank of Zimbabwe (RBZ) John Mangudya said free forex funds held by companies and individuals played a catalytic role in enhancing confidence in the foreign exchange market, and in promoting economic development.

“Free funds are made up of diaspora remittances, funds remitted into the country by international organisations, embassies, non-governmental organisations (NGOs), donations and any other funds realised by individuals from offshore activities.

“The Bank would, therefore, like to reassure all holders of free funds that their funds are very safe and secure in Zimbabwe.

“The same is true for all other foreign currency accounts and that the current export retentions are being maintained at their current levels.

“The Bank has, therefore, no appetite at all to tamper with the legal status of the public’s foreign currency accounts,” Mangudya said.

“Allowing the use of free funds within the national economy for the payment of customs duties on selected products, paying for emergency passports, procurement of basic commodities such as food items and fuel, under the direct fuel (DFI) scheme, should not be misconstrued as going back to dollarisation, but rather as common good for the country to promote the inflow of free funds from the diaspora, and necessary to buttress the confidence that is needed under the de-dollarisation process,” he added.

Mangudya’s statement comes at a time that many people with free funds were still jittery about the decision by the government last year to challenge them to show the source of their funds.
Speaking in November last year, deputy Finance minister Clemence Chiduwa said then that the government planned to compel importers to declare their source of foreign currency — failure of which their goods would be seized.

Chiduwa also said that the decision to ask importers to reveal their source of foreign currency was meant to tame the country’s thriving foreign currency parallel market.

However, this was at odds with Statutory Instrument (SI) 112 of 2017, which was relaxed last year by the government to allow people with free funds to import goods, including basic consumer items.

The lifting of the import ban came as the country began experiencing debilitating shortages of foreign currency.
Addressing journalists in the capital on October 23 in 2018, the ministers of Information and Finance — Monica Mutsvangwa and Mthuli Ncube respectively — said that decision had been taken with the interest of citizens in mind, and to curb rising prices and shortages of basic goods in shops.

“As a way forward, Cabinet resolved that the minister of Industry and Commerce temporarily amends Statutory Instrument 112 of 2017, to allow individuals and companies with offshore funds and free funds to import basic commodities currently in short supply.

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“This will be done pending the return to normalcy of buying patterns of the public and adequate restocking by manufacturers,” Mutsvangwa said then.

On his part, Ncube also said the move was aimed at pushing down prices and ensuring availability of basic consumer goods, as the country was approaching the festive season.

“All we are doing is increasing the supply of commodities … allow those with free funds, offshore funds to buy whatever they want to buy and bring it in. We did this in 2009 and it worked very well,” he said.

Yesterday, Mangudya said while people with free funds were allowed to use their money, the government was not going to revert to the general use of the US dollar and other hard currencies in the country.
Instead, the central bank chief said, the RBZ was encouraged by the “positive de-dollarisation process” that he said had taken place in the country.

“The use of the local currency for transacting purposes has also continued to go up, reaching a total amount of Z$459,6 billion from 189 million transactions for the full year in 2019.

“These measurements of the proportion of the use of the local currency in the economy show that the country is on the right trajectory to de-dollarisation.

“The Bank shall, therefore, continue to provide incentives to promote and defend the use of the local currency within the economy in order to support the de-dollarisation process

“The Bank believes that the macro-economic signals that include fiscal and monetary discipline, prospects of positive economic growth and lower inflation are improving to support a gradual de-dollarisation process within a timeframe of five years.

“This is in line with other countries’ experiences on de-dollarisation,” Mangudya said further.

In June last year, the government rocked the local market with its sudden decision to end the general use of multiple currencies, including the US dollar — without having put adequate measures in place to shore up the resuscitated Zimbabwe dollar.

And in a bid to stop the use of multiple currencies, the government also invoked Statutory Instrument 212 of 2019 to support the ban on trading in US dollars and other foreign currencies.

However, and following the government’s rushed ban of the general use of the United States dollar in the country, the much coveted greenback has come back with a bang — with many businesses now openly opting to charge and sell their goods in that currency.

All this comes as the country is in the grip of a huge economic crisis — the worst in a decade — which has stirred anger and restlessness among long-suffering Zimbabweans.

As a result, the country has been experiencing a myriad challenges, including struggling to import critical medicines, fuel, electricity and water treatment chemicals, among other things.

The authorities are also sweating on imports of grain following the severe drought which is ravaging the region and which has left Zimbabwe needing to import 800 000 metric tonnes of maize to feed more than eight million people who are facing hunger.

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