Govt moves to promote use of Zimdollar

THE Government has instituted measures to promote wider use of the Zimbabwe dollar in transacting, which will see some exporters settling up to 50 percent of their taxes in local currency.

Treasury today announced a number of fiscal interventions, which it said were aimed at encouraging the use of the Zimbabwe dollar in domestic transactions.

The measures demonstrate the Government's unflinching commitment to promote the wider use of the domestic currency, strengthen the economy and foster lasting macro-economic stability.

Further, the interventions are also aimed at stemming illegal trade in foreign currency and the associated practices of indexing of prices of goods and services to black market exchange rates.

Continuation of the unlawful practices, the Treasury said, significantly contributed to price instability in the economy and imposed downside risk to macro-economic stability, domestic and international competitiveness.

Reintroduction of the Zimbabwe dollar has restored domestic and export competitiveness, rapidly stabilising the current account, which has also been boosted by international remittances, growth in exports and import substitution.

Finance and Economic Development Minister, Professor Mthuli Ncube, said in a statement today that mining firms could now pay royalties in Zimbabwe dollars up to 50 percent of the amount due.

Previously, mining entities settled the full amount, a percentage of the gross of their total exports, in foreign currency since virtually all minerals are export products.

Similarly, the minister said duties and taxes on importation of designated motor vehicles are now payable in local currency up to a limit of 50 percent of the amount due.

"All domestic taxes due from exporters on their export receipts are now payable in both foreign and local currency in proportion to the approved export retention levels.

"As an example, an exporter who received foreign currency of say US$1 000 at 40 percent surrender ratio (60 percent retention) will pay taxes on the 40 percent in Zimbabwe dollars and 60 percent in foreign currency," Minister Ncube said.

The Treasury chief said over the past 40 months, the Government had instituted numerous measures to bring macro-economic stability. These included fiscal consolidation.

Since Treasury streamlined and realigned Government expenditure systems, Zimbabwe has been able to achieve a balanced budget and eliminated fiscal deficits.

Measures instituted to improve macro-economic performance, which to a good extent have been successful, were implemented against the adverse background of drought, Cyclone Idai and the Covid-19npandemic.

Minister Ncube also said consistent implementation of the monetary targeting framework by the Reserve Bank of Zimbabwe and close coordination between fiscal and monetary authorities had been key in the journey towards prices stability.

"These developments have also seen the rapid growth of privately held foreign currency reserves from levels of around US$300 million in 2018 to over US$2 billion currently held in Zimbabwean banks," he said.

The Treasury boss said official reserves had also increased from less that US$100 million to more than US$1,2 billion, including the 960 million equivalent of special drawing rights from the International Monetary Fund.

"In the intervening period, the Government has also improved access to foreign currency by all bonafide businesses and individuals through the auction system.

"While the foreign currency auction system has provided a platform for continuous and sustainable use of local currency by individuals and corporations, it is now imperative to expand the areas in which the Zimbabwe dollar should be used in the economy and further provide incentives for its use," Minister Ncube said.