Govt moves to kill black market

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.

    Comments (11)

    The real challenge is the author of the policy who has lost credibility, trust and confidence from the public because of toxic territory called zanu pf.

    Kufandada - 21 February 2019

    totenda zvaitika

    charera - 21 February 2019

    With Zanu PF in power and demanding to be superior to the government , we are certainly going nowhere. The Politburo financial dinosaurs of yesteryear continue to pull the strings from the Shake Shake building . We are in a cul-de-sac. All is doom and gloom.

    Argus - 21 February 2019

    I give it 6months tops. The zeroes will be pregnant and a few months later will give birth to new zeroes. Just watch. Mangudya can choose to call it RTGS but in reality it's Zim dollar. Zim dollar is not anchored by anything. No manufacturing, no tax base (everyone is unemployed), and no planning or consumer/investor confidence. Zanu never learns. They keep repeating 2008 under a different theme but same results. So are salaries going to jump 4 fold?

    Moe Syszlack - 21 February 2019

    Really, why has it taken so long time to balance this simple equation? We do have PHD guys and women who`re supposed to know better. I glad about the sudden U- Turn, for the betterment of beloved country. But, I`m definitely not impressed about the political arrogance in our country.

    Lawrence Chirinzi - 21 February 2019

    Only two items are vivid in this MPS from my perspective; calling bond notes/coins Zim$ and inter-bank trading of foreign currency. We have been this route before with Gideon Gono the inter -bank trading will be overtaken by the Bureaux De Change within 6 months as they will be offering better rates, the 'new currency' will start spiraling uncontrollably. I am surprised CZI welcomes the move and gives it a 5 star or is it Jabangwe's personal opinion. As long as companies do not retain 100% of their foreign currency and must que at the RBZ for allocation industry is going nowhere, to then even predict that prices will come down is daydreaming. The parallel-market is now moving from operating on the streets to some small box offices in the street called Bureaux de Change in the lead is the RBZ.

    Sinyo - 22 February 2019

    God is in it

    ndini - 22 February 2019

    That CZI chap - Jabangwe - he talks absolute c...p. The bond is still being traded at a street value. No shop with a price list of say $8.70 for an item is going to take Bond Notes, he will insist on US$8.70 for that product. We have been screwed, again, by selfish thieving corrupt ZanuPf . Welcome to the Zim Dollar.

    Is that so? - 22 February 2019

    Some of us no longer want our problems to be resolved. To them whatever the Government does stinks. Everything stinks. If I got this whole thing straight the monetary policy was made after consultation with industry and the banking sector. That is why CZI is pleased with it. They were involved. It is true that when you lose credibility it becomes difficult to be accepted no matter how much you try but can't we give these things a chance?

    Godknows - 22 February 2019

    Government cannot 'kill' the black market it is their cashcow they are the big fish that fuels the black market. What they have done is to take their foot soldiers out of the streets legalise their activities through the Bureaux de Change rates on the Bureaux will be more attractive than the bank rates. Government has no credit lines to support RTGS /Bond already in the system which will start losing value by the day because other economic fundamentals like production for export, corruption economic and socio-political reforms trust have not been addressed. Gideon Gono tried all what Mangudya is doing and it dissmally failed as we all know.

    Widzo - 22 February 2019

    The problem is we do not have the USD; industry is not producing for exports. Companies that were manufacturing were taken over by politicians who just dug their greedy fingers into working capital. There is no meaningful agriculture. The so called land audit appears to take ages.This will not work. Mark my comments.

    yohwe - 23 February 2019

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