HARARE – The government yesterday introduced a battery of measures aimed at bringing down the high prices of goods in the country, as well as growing the economy — including opening up foreign currency trading by banks and bureaux de change.
Presenting his monetary policy statement (MPS) in Harare, Reserve Bank of Zimbabwe (RBZ) governor — John Mangudya — said the new monetary policies that he effected would stabilise both exchange rates and the prices of goods and services.
Both consumers and business immediately welcomed the new measures saying these should have been introduced much earlier to stem the country’s deepening economic crisis and the thriving foreign currency black market which has wreaked havoc on prices.
Contacted by the Daily News last night, the president of the Confederation of Zimbabwe Industries (CZI), Sifelani Jabangwe, said business was very happy with the new measures.
“This is very much welcome and it is more of what we have been calling for … people will start going to the banks and buy foreign currency all round, getting fair value for their money, instead of being cheated in the distorted market.
“People were also not remitting their forex into banks because they preferred the parallel market, where there was value for US dollars, but now we will see people taking their money to banks.
“It will also help with liquidity relating to Diaspora remittances as people can now take the forex to the bank and not parallel markets,” Jabangwe said.
“Prices are thus likely to go down. Businesses and local manufacturers will be export competitive as the RBZ has cleared the air on currency exchange rates.
“Investment will also start trickling in because there is a defined exchange rate now. Before, investors would ask us the rate of their investments and we could not clarify what the national exchange rate was relative to the value of their investment,” he added.
Mangudya said the central bank had put in place measures to maintain stability in the market through the establishment of an inter-bank foreign exchange market with immediate effect — to formalise the trading of real time gross settlement (RTGS) balances and bond notes with hard currencies on a willing-buyer willing-seller basis, through banks and bureaux de change.
“This is essential in order to bring sanity in the foreign currency market, whilst at the same time promoting exports, Diaspora remittances and investments for the good of our national economy,” he said.
In this regard too, existing RTGS balances, bond notes and coins in circulation would now be denominated as RTGS dollars “in order to establish an exchange rate between the current monetary balances and foreign currency”.
This means that RTGS dollars have now formally become part of the country’s multi-currency system — with the legal instrument to give effect to this having already been prepared.
“The RTGS dollars shall be used by all entities (including the government) and individuals in Zimbabwe for the purposes of pricing of goods, services, debts, accounting and settlement of domestic transactions.
“The use of RTGS dollars for domestic transactions will eliminate the existence of the multi-pricing system and charging of goods and services in foreign currency within the domestic economy.
“In this regard, prices should remain at their current levels and or to start to decline in sympathy with the stability in the exchange rate given that the current monetary balances have not been changed,” Mangudya said.
“In this respect, the RBZ will commit all its efforts to use the instruments at its disposal to maintain stability of the exchange rate,” he also warned.
Mangudya also revealed that the central bank had arranged sufficient lines of credit to enable it to maintain adequate foreign currency to underpin the exchange market.
This was essential to restore the purchasing power of RTGS balances through the safeguarding of the stability of prices “emanating from the pass-through effects of exchange rate movements”.
All the foreign currency from the inter-bank market would be utilised for bonafide foreign payment invoices except for education fees.
All foreign liabilities or legacy debts due to suppliers and service providers such as the International Air Transport Association (IATA) and declared dividends would be treated separately after such transactions had been registered with authorities “to determine the roadmap for orderly expunging the legacy debt”.
All other foreign currency requirements for government expenditure and other essential commodities that include fuel, cooking oil, electricity, medicines and water chemicals would continue to be made available through the existing letters of credit facilities or the country’s Foreign Exchange Allocations Committee.
“Banks shall report activities of the inter-bank foreign currency market to the Bank that shall closely monitor the foreign currency trades on a daily basis using the form and format stipulated by the Bank.
“Bureaux de change shall be authorised to purchase foreign currency without limits but shall be limited to sell foreign currency for small transactions such as subscription, business and personal travel up to a maximum aggregate daily limit of US$10 000 per bureau de change.
“Like with banks, bureaux de change and their agents shall report their activities of the inter-bank on a daily basis as required by the Bank,” Mangudya said.
Earlier on, the central bank chief admitted candidly that the economic situation in the country had deteriorated significantly since his last MPS in September last year.
“The significant shift in the economic fundamentals during the last quarter of 2018 also increased the practice by retailers of charging goods and services on the basis of a multi-tier pricing system, where a single product has different prices depending on the mode of payment.
“The current monetary arrangement, if maintained, could pose the risk of costly re-dollarisation of the economy which will move the economy into a recession,” Mangudya said.
This comes after Finance minister Mthuli Ncube, in a desperate bid to balance the government’s shambolic books, moved to raise the State’s revenue late last year through the unpopular two cents per dollar transaction tax.
However, this caused the economy to go into a tailspin, leading to panic buying of commodities and shortages of basic consumer goods.
The minister was later compelled by his bosses to review the tax, although this still failed to completely douse the raging fires, as the economy remained in dire straits.