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Zimbabwean businesses found guilty of manipulating the new ZiG currency will face stiffer penalties while they will also be required to open bank accounts and use point-of-sale machines as the government cracks down on resurfacing parallel market exchange rates.
Zimbabwe this year launched the Zimbabwe currency, the ZiG, due to hyperinflation in previous years, which is said to be backed by foreign exchange and gold reserves held by the central bank.
While ZiG has maintained price stability since its launch in April, parallel market rates have begun to re-emerge.
The government of President Emerson Mnangagwa said the move dealt a setback to efforts to de-dollarize a country where up to 80% of transactions are settled in dollars.
“Penalties will be imposed on all perpetrators of unfair price hikes, currency manipulation, smuggling and various unfair trade practices. Government will adjust fines for various offences from a minimum of $200 (R3,665) at level 5 to a maximum of $5,000 (level 14 or equivalent in Zimbabwean currency),” read a briefing after Mnangagwa’s cabinet meeting on Tuesday.
Mnangagwa’s government touted the Zimbabwean currency as a substantive solution to the country’s years of hyperinflation. Zimbabwe previously introduced bonds, the Zimbabwe dollar, bearer cheques, agri-cheques (agricultural cheques) and recalibrated an earlier local currency, but without making any headway.
Zimbabwe’s Ministry of Finance said the new currency, introduced in April, has stabilised exchange rates and prices, with composite monthly inflation falling to -0.1% as of July 2024. The foreign exchange component of broad money has also fallen from a peak of 87% in February 2024 to 84% in May 2024.
Finance Minister Mtuli Ncube will present a timetable for de-dollarization, although government critics say confidence in the local currency must be strengthened before abandoning the current multi-currency system.
Officials yesterday agreed on the “operational modalities for introducing the ZiG currency into the economy as legal tender.”
“The ministers of finance, economic development and investment promotion have now developed a roadmap for de-dollarization and set a timeline,” they said.
The cabinet meeting noted that “some retailers and manufacturers have reportedly used unofficial exchange rates in their operations,” and the government is now preparing to take action on this.
The measures include asking the Reserve Bank of Zimbabwe to strengthen “mandatory licensing requirements for all business operators to open bank accounts and have point-of-sale machines” and to send inspectors to crack down on violations that affect price stability and the supply of basic commodities.
To increase demand and availability of local currency, Ncube has stipulated that corporate income tax shall be paid in a 50:50 ratio for companies with foreign exchange income exceeding 50%. Only in cases where transactions are mainly in local currency, corporate income tax shall be paid in the transaction currency on a pro rata basis.
In another move to boost demand for the local currency, user fees for government departments must now be paid in local currency, in addition to passport and other designated fees, which are paid in U.S. dollars.
Business Report
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