Opinion / Columnist
SI 142 yields positive results
15 Jul 2019 at 07:45hrs | Views
Having been asked by fellow Zimbabweans to clarify the impact of Statutory Instrument 142 of 2019 (SI 142/2019), announced by Finance and Economic Development Minister Professor Mthuli Ncube on June 24, 2019, I feel inspired, honoured and motivated to write and share this article.
I hope this article will answer most of the critical questions and make all Zimbabweans understand the benefits, and the positive results anticipated in future. I also included some frequently asked questions (FAQs), which will hopefully further clarify the effects of SI 142 in greater detail.
A visible and positive change started in February 2019 when Finance and Economic Development Minister Professor Mthuli Ncube took the brave, but rewarding decision to announce the Monetary Policy Statement, which created a new currency called Real Time Gross Settlement (RTGS) dollars against foreign currencies.
The starting rate for RTGS dollars against the United States (US) dollar was 1: 2,5 on a willing buyer willing seller basis. This means a rate was created to separate the RTGS dollars and the US dollars as an initial step to reintroduce our own local currency.
It also means the RTGS dollar and the US dollar will have separate bank accounts called RTGS accounts and Nostro accounts, respectively. The Monetary Policy Statement created an option where people and businesses can exchange currencies at the interbank market.
The challenge was the parallel market (black market), which offered better rates. The black market continued to thrive, and the economy was self-dollarising with the potential risk of making the RTGS dollar irrelevant.
Something urgent had to be done to stop the economy from being dollarised by the black market. On Monday, June 24, 2019, Prof Mthuli Ncube made an unprecedented announcement of Statutory Instrument 142 of 2019 (SI 142/2019) that banned foreign currency as a means of payment in Zimbabwe with immediate effect.
This meant only the Zimbabwean dollar was the legal currency that can be used in Zimbabwe to settle payments for goods, services or financial instruments. The Zimbabwean dollar(s) refer(s) to bond notes and bond coins made by the Reserve Bank of Zimbabwe, and RTGS dollars, popularly known as swipe or transfer.
The SI 142/2019 encouraged people and businesses to deposit their foreign currency in exchange for local money.
It is also pleasing that the interbank market rate has surpassed the black market rate, officially giving the bank system control over the economy. The SI 142/2019 also saw prices in the retail sector going down.
While the economy is improving, it is important to answer some of the FAQs, such as: Does SI 142/2019 prohibit Zimbabweans from keeping foreign currency, especially the US dollar? The answer to this question is no, SI 142/2019 does not prohibit Zimbabweans from keeping foreign currency, but if one needs to buy goods or services in Zimbabwe, one must change the money into local currency first.
The other FAQ is: Is foreign currency in our Nostro bank accounts safe? Yes, all foreign currency deposited in local banks is safe and will be kept as US dollars.
Can people and businesses withdraw their foreign currency from their Notro accounts? The answer is yes, foreign currency can be withdrawn according to the Bank Code of Practice and RBZ rules and regulations.
Further clarification can be obtained from banks. Although prices of basic consumer goods are still high, the direction the economy is taking shows positive results in the long term. It's a matter of time before the black market vanishes and sanity returns in our beloved Zimbabwe. I invite all Zimbabweans to thank Professor Ncube for doing a great job so far.
The economy is heading in the right direction and with patience, the desired economy will blossom in our beloved Zimbabwe.
Tendai A. Chinamasa is an economic analyst.
I hope this article will answer most of the critical questions and make all Zimbabweans understand the benefits, and the positive results anticipated in future. I also included some frequently asked questions (FAQs), which will hopefully further clarify the effects of SI 142 in greater detail.
A visible and positive change started in February 2019 when Finance and Economic Development Minister Professor Mthuli Ncube took the brave, but rewarding decision to announce the Monetary Policy Statement, which created a new currency called Real Time Gross Settlement (RTGS) dollars against foreign currencies.
The starting rate for RTGS dollars against the United States (US) dollar was 1: 2,5 on a willing buyer willing seller basis. This means a rate was created to separate the RTGS dollars and the US dollars as an initial step to reintroduce our own local currency.
It also means the RTGS dollar and the US dollar will have separate bank accounts called RTGS accounts and Nostro accounts, respectively. The Monetary Policy Statement created an option where people and businesses can exchange currencies at the interbank market.
The challenge was the parallel market (black market), which offered better rates. The black market continued to thrive, and the economy was self-dollarising with the potential risk of making the RTGS dollar irrelevant.
Something urgent had to be done to stop the economy from being dollarised by the black market. On Monday, June 24, 2019, Prof Mthuli Ncube made an unprecedented announcement of Statutory Instrument 142 of 2019 (SI 142/2019) that banned foreign currency as a means of payment in Zimbabwe with immediate effect.
This meant only the Zimbabwean dollar was the legal currency that can be used in Zimbabwe to settle payments for goods, services or financial instruments. The Zimbabwean dollar(s) refer(s) to bond notes and bond coins made by the Reserve Bank of Zimbabwe, and RTGS dollars, popularly known as swipe or transfer.
The SI 142/2019 encouraged people and businesses to deposit their foreign currency in exchange for local money.
It is also pleasing that the interbank market rate has surpassed the black market rate, officially giving the bank system control over the economy. The SI 142/2019 also saw prices in the retail sector going down.
While the economy is improving, it is important to answer some of the FAQs, such as: Does SI 142/2019 prohibit Zimbabweans from keeping foreign currency, especially the US dollar? The answer to this question is no, SI 142/2019 does not prohibit Zimbabweans from keeping foreign currency, but if one needs to buy goods or services in Zimbabwe, one must change the money into local currency first.
The other FAQ is: Is foreign currency in our Nostro bank accounts safe? Yes, all foreign currency deposited in local banks is safe and will be kept as US dollars.
Can people and businesses withdraw their foreign currency from their Notro accounts? The answer is yes, foreign currency can be withdrawn according to the Bank Code of Practice and RBZ rules and regulations.
Further clarification can be obtained from banks. Although prices of basic consumer goods are still high, the direction the economy is taking shows positive results in the long term. It's a matter of time before the black market vanishes and sanity returns in our beloved Zimbabwe. I invite all Zimbabweans to thank Professor Ncube for doing a great job so far.
The economy is heading in the right direction and with patience, the desired economy will blossom in our beloved Zimbabwe.
Tendai A. Chinamasa is an economic analyst.
Source - the herald
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