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Zimbabwe enforces usage of South African Rand
04 May 2016 at 19:48hrs | Views
The Reserve Bank of Zimbabwe has started enforcing usage of the South African rand in the country's economy to offset cash shortages that have arisen out of the massive adoption of the United States dollar, which business leaders and other officials say is rendering the country uncompetitive.
Zimbabwe adopted a multiple currency regime in 2009 after its own currency tumbled owing to hyper-inflation. However, according to the central bank, there has been stronger usage of the US Dollar while other currencies such as the euro and the rand have been side-lined.
This had led to crippling cash shortages and most banks imposing withdrawal limits. Only about six banks were importing the United States Dollars, living the banking sector cash strapped and unable to meet demand from depositors.
But the central bank on Wednesday introduced new policy measures aimed at addressing the cash shortages.
"In order to restore and promote the widespread usage of currencies, with effect from May 5 2016, 40% of all new US Dollar foreign exchange receipts from export of goods and services shall be converted by the Reserve Bank at the official exchange rate to Rands and 10% into euros.
"This policy measure is designed to ensure that we spread the demand for cash amongst a wide range of currencies in order to mitigate against concentration risk," central bank governor, John Mangudya said late on Wednesday.
Additionally, the Reserve Bank of Zimbabwe had also established a $200m foreign exchange and export incentive facility supported by Afreximbank. Under this facility, the central bank will incentivise exporters with a 5% incentive on all foreign exchange receipts, including tobacco and gold deliveries.
This incentive will be paid in bond notes and coins (local currency that is backed by a bond held by the central bank). To encourage efficient utilisation of the rand and the Euro in the Zimbabwean economy, Mangudya said "payments for various imports of goods and services are done using the currency of origin" of the imports.
"Product pricing in shops and other service providers would need to be reflective of the multiple currency system. In view of the fact that most products in Zimbabwean shops are from South Africa, it is pertinent that shop owners and businesses should think in Rand terms as opposed to abstract US Dollar prices," added Mangudya.
Zimbabwe has also now imposed withdrawal limits from banks of $1000, €1000 and R20 000 per day. All businesses are also now being required to display exchange rates and to install point of sale machines to promote usage of plastic money.
Zimbabwe adopted a multiple currency regime in 2009 after its own currency tumbled owing to hyper-inflation. However, according to the central bank, there has been stronger usage of the US Dollar while other currencies such as the euro and the rand have been side-lined.
This had led to crippling cash shortages and most banks imposing withdrawal limits. Only about six banks were importing the United States Dollars, living the banking sector cash strapped and unable to meet demand from depositors.
But the central bank on Wednesday introduced new policy measures aimed at addressing the cash shortages.
"In order to restore and promote the widespread usage of currencies, with effect from May 5 2016, 40% of all new US Dollar foreign exchange receipts from export of goods and services shall be converted by the Reserve Bank at the official exchange rate to Rands and 10% into euros.
Additionally, the Reserve Bank of Zimbabwe had also established a $200m foreign exchange and export incentive facility supported by Afreximbank. Under this facility, the central bank will incentivise exporters with a 5% incentive on all foreign exchange receipts, including tobacco and gold deliveries.
This incentive will be paid in bond notes and coins (local currency that is backed by a bond held by the central bank). To encourage efficient utilisation of the rand and the Euro in the Zimbabwean economy, Mangudya said "payments for various imports of goods and services are done using the currency of origin" of the imports.
"Product pricing in shops and other service providers would need to be reflective of the multiple currency system. In view of the fact that most products in Zimbabwean shops are from South Africa, it is pertinent that shop owners and businesses should think in Rand terms as opposed to abstract US Dollar prices," added Mangudya.
Zimbabwe has also now imposed withdrawal limits from banks of $1000, €1000 and R20 000 per day. All businesses are also now being required to display exchange rates and to install point of sale machines to promote usage of plastic money.
Source - fin24
