News / Local
Govt ups forex black market fight
08 Oct 2021 at 01:26hrs | Views
GOVERNMENT is implementing a raft of additional measures to curb the illegal trading of forex and the benchmarking of prices using the parallel market rates, Finance and Economic Development Minister Professor Mthuli Ncube, said yesterday.
Foreign currency abusers and money laundering kingpins have continued to defy the law, despite their arrest, a situation that has re-ignited financial market distortions.
In the past few weeks, because of illegal forex trading and money laundering, some errant individuals have continued to benchmark prices with black market rates, which of late have ridiculously shot up.
For example, this week the exchange rate in the parallel market was pegged at US$1: ZWL$180 compared to margins between ZWL$150 and ZWL$160 in the past three weeks.
It is against this background that some players in the formal market were now pricing their goods and services benchmarking the black-market rate, in some instances with the prices pegged at US$1: ZWL$200.
This means that the buying power of citizens, a majority of them who earn in local currency was being eroded.
In a statement, Finance and Economic Development Minister Professor Mthuli Ncube said the Reserve Bank of Zimbabwe's Financial Intelligence Unit (FIU) has started identifying and prosecuting perpetrators of parallel market activities.
He said authorities were also implementing a raft of additional measures to curb the illegal trading of forex and the benchmarking of prices using the parallel market rates.
"The Zimbabwe Revenue Authority (Zimra) will be carrying out impromptu of audits of corporate activities with a view of quantifying the potential tax liabilities arising out of illegal foreign currency trading.
"Zimra will also be carrying out compliance audits with respect to compliance with the Location Tax introduced during the 2021 fiscal year," he said.
Prof Ncube said the FIU would continuously monitor and analyse financial transactions to identify to expose and take action against perpetrators of money laundering and other financial crime.
He said regulatory bodies including the Public Accountants and Auditors Board will also be working on a framework to impose appropriate financial and professional sanctions on members of the accounting, auditing and other professions who may be complicit in superintending over illicit affairs by corporate entities which they are charged with running.
"Business who disregard the law continue to price their goods on the parallel market rates will have their license suspended. Members of the public are also strongly encouraged to report to the FIU and the National Economic Conduct Inspectorate, all business entities directly or indirectly benchmarking prices and parallel market exchange rates," said Prof Ncube.
Government through various agencies is presently seized with instituting various measures to curb illegal trade in foreign currency and its associated twin evil; that of parallel market benchmarking or indexation of price of goods and services at parallel market exchange rates.
Prof Ncube noted that the recent resurgence of illegal trade in foreign currency and associated twin dealings are significant contributors to price instability in the economy.
As a result, he said this was imposing downside risks to macro-economic stability, and the erosion of domestic and international competitiveness.
"Over the past 36 months, the Government has instituted numerous initiatives to bring macro-economic stability.
"These include fiscal consolidation which has resulted in balanced budget performance and the elimination of destabilising fiscal deficits despite major macro-economic shocks such the 2019-2020 droughts, cyclone Idai, and the ongoing threat of the Covid-19 pandemic," he said.
Furthermore, Prof Ncube noted the restoration of domestic and export competitiveness through the reintroduction of the Zimbabwe dollar, has seen rapid gains being made in stabilising the current account boosted by increased remittances, enhanced export performance and notable import substitution effects.
These developments have also seen the rapid growth of privately held foreign currency reserves from levels of around US$300 million in 2018, to US$1,8 billion presently held in Zimbabwe banks.
Official reserves have also increased from less than US$100 million to over US$1,2 billion at present inclusive of the US$960 million recently availed by the International Monetary Fund to Zimbabwe.
"In the intervening period, Government has also improved access to foreign currency by all bona fide businesses and individuals through the auction system.
"However, a residual core foreign currency demand, fuelled mainly by speculative, and store of value demand for currency on one hand as well as criminal and money laundering activities on the other, has perpetuated and sustained the parallel market for foreign currency," he said.
The result has been that despite large and small corporates, SMEs and individuals having access to RBZ auction system, the existence of the parallel market has provided an opportunity for price benchmarking at parallel market rates.
This is despite the fact that some of the businesses are accessing their full requirements for foreign exchange via the official channels.
These practices were the intended targets of Statutory Instrument 127.
Foreign currency abusers and money laundering kingpins have continued to defy the law, despite their arrest, a situation that has re-ignited financial market distortions.
In the past few weeks, because of illegal forex trading and money laundering, some errant individuals have continued to benchmark prices with black market rates, which of late have ridiculously shot up.
For example, this week the exchange rate in the parallel market was pegged at US$1: ZWL$180 compared to margins between ZWL$150 and ZWL$160 in the past three weeks.
It is against this background that some players in the formal market were now pricing their goods and services benchmarking the black-market rate, in some instances with the prices pegged at US$1: ZWL$200.
This means that the buying power of citizens, a majority of them who earn in local currency was being eroded.
In a statement, Finance and Economic Development Minister Professor Mthuli Ncube said the Reserve Bank of Zimbabwe's Financial Intelligence Unit (FIU) has started identifying and prosecuting perpetrators of parallel market activities.
He said authorities were also implementing a raft of additional measures to curb the illegal trading of forex and the benchmarking of prices using the parallel market rates.
"The Zimbabwe Revenue Authority (Zimra) will be carrying out impromptu of audits of corporate activities with a view of quantifying the potential tax liabilities arising out of illegal foreign currency trading.
"Zimra will also be carrying out compliance audits with respect to compliance with the Location Tax introduced during the 2021 fiscal year," he said.
Prof Ncube said the FIU would continuously monitor and analyse financial transactions to identify to expose and take action against perpetrators of money laundering and other financial crime.
He said regulatory bodies including the Public Accountants and Auditors Board will also be working on a framework to impose appropriate financial and professional sanctions on members of the accounting, auditing and other professions who may be complicit in superintending over illicit affairs by corporate entities which they are charged with running.
"Business who disregard the law continue to price their goods on the parallel market rates will have their license suspended. Members of the public are also strongly encouraged to report to the FIU and the National Economic Conduct Inspectorate, all business entities directly or indirectly benchmarking prices and parallel market exchange rates," said Prof Ncube.
Government through various agencies is presently seized with instituting various measures to curb illegal trade in foreign currency and its associated twin evil; that of parallel market benchmarking or indexation of price of goods and services at parallel market exchange rates.
Prof Ncube noted that the recent resurgence of illegal trade in foreign currency and associated twin dealings are significant contributors to price instability in the economy.
As a result, he said this was imposing downside risks to macro-economic stability, and the erosion of domestic and international competitiveness.
"Over the past 36 months, the Government has instituted numerous initiatives to bring macro-economic stability.
"These include fiscal consolidation which has resulted in balanced budget performance and the elimination of destabilising fiscal deficits despite major macro-economic shocks such the 2019-2020 droughts, cyclone Idai, and the ongoing threat of the Covid-19 pandemic," he said.
Furthermore, Prof Ncube noted the restoration of domestic and export competitiveness through the reintroduction of the Zimbabwe dollar, has seen rapid gains being made in stabilising the current account boosted by increased remittances, enhanced export performance and notable import substitution effects.
These developments have also seen the rapid growth of privately held foreign currency reserves from levels of around US$300 million in 2018, to US$1,8 billion presently held in Zimbabwe banks.
Official reserves have also increased from less than US$100 million to over US$1,2 billion at present inclusive of the US$960 million recently availed by the International Monetary Fund to Zimbabwe.
"In the intervening period, Government has also improved access to foreign currency by all bona fide businesses and individuals through the auction system.
"However, a residual core foreign currency demand, fuelled mainly by speculative, and store of value demand for currency on one hand as well as criminal and money laundering activities on the other, has perpetuated and sustained the parallel market for foreign currency," he said.
The result has been that despite large and small corporates, SMEs and individuals having access to RBZ auction system, the existence of the parallel market has provided an opportunity for price benchmarking at parallel market rates.
This is despite the fact that some of the businesses are accessing their full requirements for foreign exchange via the official channels.
These practices were the intended targets of Statutory Instrument 127.
Source - The Chronicle
