News / National
Zimdollar remains legal tender until month-end
10 Apr 2024 at 01:02hrs | Views
The Zimbabwe dollar remains legal tender for all domestic transactions until April 30, when the Zimbabwe Gold (ZiG) notes and coins will come into circulation, the Reserve Bank of Zimbabwe (RBZ) has said.
The central bank also said the recent introduction of the new currency had rendered the 10 percent trading margin by businesses economically irrelevant.
Following the announcement of the new currency last Friday, some traders, transporters and members of the public, stopped accepting the Zimbabwe dollar notes, disrupting the transacting processes.
RBZ Governor, Dr John Mushayavanhu, said the 21-day transitional period before the issuance of the ZiG notes and coins would see the bank conducting an extensive educational and awareness campaign on the new currency's structure and security features before the notes and coins are released.
"Between now and April 30, 2024, the bond notes are still legal tender; banks can pay them out to customers, and people should be able to use those to transact and for change.
"It is only after the 30th that we will be introducing the new notes and coins," he said during a 2024 Monetary Policy Statement breakfast meeting in Harare yesterday.
Dr Mushayavanhu said the ZiG was going to be a stable currency, noting the new money had already started appreciating after gaining in Monday and Tuesday trading sessions on the interbank market, which saw it add 0,2 percent against the US dollar since its introduction on Friday.
The central bank chief noted that due to the adoption of the market-determined exchange rate, the retailers' 10 percent trading margin was now irrelevant.
"If you are a retailer and you put a 10 percent margin, you are most likely to be outside the market. You cannot put 10 percent on top of a stable exchange rate, so you are going to moderate yourselves," said the Governor.
He added; "If you do not apply it and take the interbank exchange rate, you are not flouting the law, but if you apply more than 10 percent, you will be above the official exchange rate of 13,50 ZiG and (You will be around) probably 14 ZiG, hence you will price yourself out of business and will not be able to sell your products."
The Governor noted that while the 10 percent margin was a result of a statutory instrument, due process would be required to remove it.
Statutory Instrument 185 of 2020 authorises dealers and the market to price goods and services based on the prevailing interbank market rate plus a margin of up to 10 percent.
The central bank chief expressed confidence the new currency would be able to retain value given the measures put in place, including maintaining a tight monetary policy stance, floating the exchange rate and occasionally intervening to support the currency and anchoring the currency on precious metals (mainly gold) and foreign exchange.
The RBZ's reserve asset holdings comprise US$100 million in cash and 2,522 kg of gold worth US$185 million to back the entire local currency component of reserve money.
The Governor noted that reversing the dollarisation trend, whereby 80 percent of transactions in the economy are in US dollars compared to 20 percent in local currency, was a gradual process.
He said that through the MPS measures and new currency, the bank would create increased demand. The measures to promote the new currency would include requiring 50 percent of quarterly payment dates (QPDs) tax obligations to be payable in ZiG.
"As we approach the June QPD, everyone is going to be looking for ZiG. In addition, all the ZiG in this market is not enough to meet 50 percent of the payments.
He said taxpayers who procrastinate taking up ZiG would have to fork out more when the tax payment falls due given the currency would have appreciated.
He also noted that when a retailer has sold their goods, they would rather keep the ZiG and maybe do certain things with the US dollar because they will need that ZiG when the next QPD arrives.
"We are on the 80-20 ratio; when we get to 70-30, certain things will also be allowed, so we gravitate towards ZiG. When we get to 60–40, more towards ZIG, and by the time we get to 50–50, you can do what you want (in terms of paying using ZiG)," he said.
Finance, Economic Development, and Investment Promotion permanent secretary, Mr George Guvamatanga, said the new currency is part of the journey towards reducing the ratio of dollarisation through increased usage of a strong local currency.
"The multi-currency regime was an agreed position between Government and industry and that is why industry is also using the US dollar as we speak today.
"So, in that journey, there will be a point where fuel will be fully sold in ZiG and all duties will be payable in ZiG. There shall be a point where all Government ministries, departments and agencies are forced to accept the currency. We are going to be forcing them very soon," he said.
Mr Guvamatanga added that the Treasury is working on a circular to all Governments ministries, departments and agencies saying that they cannot insist on payment in US dollars.
"We have not de-dollarised, and we are still in a multi-currency system. It is a journey," he said.
He noted that over the past two months, the central bank had reiterated the need to create a strong and stable currency.
At the meeting, Confederation of Zimbabwe Retailers (CZR) president, Mr Denford Mutashu, said there was need for a smoother transition and an alternative for people to continue transacting as banks and mobile money services were abruptly discontinued.
He said CZR was currently engaging some retailers who were refusing bond notes to ensure the currency changeover does not affect the transacting public.
"Price and exchange rate stability are very key in the retail sector," he said.
Zimbabwe National Chamber of Commerce (ZNCC) president, Mr Mike Kamungeremu, said the business community appreciated the continued use of multicurrency and the measures taken to defend the ZiG.
"Apart from just defending the ZiG currency, we need other Government fees to be collected in the local currency and this will erode the crisis of confidence, which is a result of past experiences," he said.
He noted that business is worried about the settlement of outstanding auction allotments set to take place over the next 24 months, indicating that it is a bit too heavy for them.
Economist Mr Nyasha Kaseke said having its currency gives the economy advantages, while another economist Dr Prosper Chitambara, said the new central bank Governor should break from the mistakes of the past and ensure the bank plays a supportive role in the economy.
The central bank also said the recent introduction of the new currency had rendered the 10 percent trading margin by businesses economically irrelevant.
Following the announcement of the new currency last Friday, some traders, transporters and members of the public, stopped accepting the Zimbabwe dollar notes, disrupting the transacting processes.
RBZ Governor, Dr John Mushayavanhu, said the 21-day transitional period before the issuance of the ZiG notes and coins would see the bank conducting an extensive educational and awareness campaign on the new currency's structure and security features before the notes and coins are released.
"Between now and April 30, 2024, the bond notes are still legal tender; banks can pay them out to customers, and people should be able to use those to transact and for change.
"It is only after the 30th that we will be introducing the new notes and coins," he said during a 2024 Monetary Policy Statement breakfast meeting in Harare yesterday.
Dr Mushayavanhu said the ZiG was going to be a stable currency, noting the new money had already started appreciating after gaining in Monday and Tuesday trading sessions on the interbank market, which saw it add 0,2 percent against the US dollar since its introduction on Friday.
The central bank chief noted that due to the adoption of the market-determined exchange rate, the retailers' 10 percent trading margin was now irrelevant.
"If you are a retailer and you put a 10 percent margin, you are most likely to be outside the market. You cannot put 10 percent on top of a stable exchange rate, so you are going to moderate yourselves," said the Governor.
He added; "If you do not apply it and take the interbank exchange rate, you are not flouting the law, but if you apply more than 10 percent, you will be above the official exchange rate of 13,50 ZiG and (You will be around) probably 14 ZiG, hence you will price yourself out of business and will not be able to sell your products."
The Governor noted that while the 10 percent margin was a result of a statutory instrument, due process would be required to remove it.
Statutory Instrument 185 of 2020 authorises dealers and the market to price goods and services based on the prevailing interbank market rate plus a margin of up to 10 percent.
The central bank chief expressed confidence the new currency would be able to retain value given the measures put in place, including maintaining a tight monetary policy stance, floating the exchange rate and occasionally intervening to support the currency and anchoring the currency on precious metals (mainly gold) and foreign exchange.
The RBZ's reserve asset holdings comprise US$100 million in cash and 2,522 kg of gold worth US$185 million to back the entire local currency component of reserve money.
The Governor noted that reversing the dollarisation trend, whereby 80 percent of transactions in the economy are in US dollars compared to 20 percent in local currency, was a gradual process.
He said that through the MPS measures and new currency, the bank would create increased demand. The measures to promote the new currency would include requiring 50 percent of quarterly payment dates (QPDs) tax obligations to be payable in ZiG.
"As we approach the June QPD, everyone is going to be looking for ZiG. In addition, all the ZiG in this market is not enough to meet 50 percent of the payments.
He said taxpayers who procrastinate taking up ZiG would have to fork out more when the tax payment falls due given the currency would have appreciated.
He also noted that when a retailer has sold their goods, they would rather keep the ZiG and maybe do certain things with the US dollar because they will need that ZiG when the next QPD arrives.
"We are on the 80-20 ratio; when we get to 70-30, certain things will also be allowed, so we gravitate towards ZiG. When we get to 60–40, more towards ZIG, and by the time we get to 50–50, you can do what you want (in terms of paying using ZiG)," he said.
Finance, Economic Development, and Investment Promotion permanent secretary, Mr George Guvamatanga, said the new currency is part of the journey towards reducing the ratio of dollarisation through increased usage of a strong local currency.
"The multi-currency regime was an agreed position between Government and industry and that is why industry is also using the US dollar as we speak today.
"So, in that journey, there will be a point where fuel will be fully sold in ZiG and all duties will be payable in ZiG. There shall be a point where all Government ministries, departments and agencies are forced to accept the currency. We are going to be forcing them very soon," he said.
Mr Guvamatanga added that the Treasury is working on a circular to all Governments ministries, departments and agencies saying that they cannot insist on payment in US dollars.
"We have not de-dollarised, and we are still in a multi-currency system. It is a journey," he said.
He noted that over the past two months, the central bank had reiterated the need to create a strong and stable currency.
At the meeting, Confederation of Zimbabwe Retailers (CZR) president, Mr Denford Mutashu, said there was need for a smoother transition and an alternative for people to continue transacting as banks and mobile money services were abruptly discontinued.
He said CZR was currently engaging some retailers who were refusing bond notes to ensure the currency changeover does not affect the transacting public.
"Price and exchange rate stability are very key in the retail sector," he said.
Zimbabwe National Chamber of Commerce (ZNCC) president, Mr Mike Kamungeremu, said the business community appreciated the continued use of multicurrency and the measures taken to defend the ZiG.
"Apart from just defending the ZiG currency, we need other Government fees to be collected in the local currency and this will erode the crisis of confidence, which is a result of past experiences," he said.
He noted that business is worried about the settlement of outstanding auction allotments set to take place over the next 24 months, indicating that it is a bit too heavy for them.
Economist Mr Nyasha Kaseke said having its currency gives the economy advantages, while another economist Dr Prosper Chitambara, said the new central bank Governor should break from the mistakes of the past and ensure the bank plays a supportive role in the economy.
Source - The Herald
