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Zimbabwe tweaks multi currency regime

by Kuda Bwititi
12 Jun 2016 at 01:06hrs | Views
Finance and Economic Development Minister Patrick Chinamasa
Government is urgently formulating a framework to promote use of multiple currencies in its departments, municipalities and parastatals to reduce over-reliance on the United States dollar.

The Reserve Bank of Zimbabwe is also expected to reconfigure the local Real Time Gross Payment System (RTGS) to process multiple currencies, with the Finance Ministry saying Zimbabwe is "not a US dollar economy".

And as US dollar cash shortages negatively affect livelihoods and commerce, Government wants wider use of other currencies, particularly the South African rand.

Most public offices - like private enterprises - demand payment for goods and services in US dollars even though Government introduced a regime in 2009 that allowed use as legal tender of currencies from terrritories such as South Africa, Botswana, China and the European Union.

But with the current US dollar cash squeeze, which has seen withdrawals drastically limited, there is renewed vigour to ensure acceptance of all currencies in the basket of legal tender approved by the Finance Ministry and Reserve Bank of Zimbabwe.

Notably, most Government offices reject South African rand payments in blatant disregard of official policy.

Rural and urban local authorities, tax agency Zimra, roads authority Zinara, the Registrar-Generals Office, Higher and Tertiary Education institutions, public health institutions, Police, courts and the Vehicle Inspection Department demand US dollar payments.

Finance and Economic Development Minister Patrick Chinamasa told The Sunday Mail he had initiated urgent meetings with key financial partners to address "multiple currency use anomalies". He said Government departments, parastatals and local authorities would soon be directed to respect the multiple currency regime.

Minister Chinamasa said he was "surprised that our own Government departments are refusing multiple currencies such as the rand".

"This is a matter that I will urgently discuss with the RBZ Governor (Dr John Mangudya) to see how we can put in place measures that will see multiple currencies being accepted at all Government and quasi-Government agencies as urgently as possible.

"We cannot have our own Government systems rejecting the rand or other currencies at a time we are experiencing cash challenges."

Minister Chinamasa urged the public to embrace the RBZ's efforts to bolster the multiple currency regime that has been made dysfunctional by over-reliance on the US dollar.

"People really need to understand that we are not a US dollar economy, but we are a multiple currency economy, so we cannot have Government departments failing to lead from the front," he said

Minister Chinamasa said the volatility of the rand was not an excuse for Government departments to reject the currency.

"The talk about the volatility of the rand should not be an issue that should stop our departments from accepting it. This is where the RBZ comes in. I am going to speak with the RBZ Governor so that we can come up with an approach that is not complicated, but which can be easily made use of by people to transact in other currencies.

"There should be a system where tariffs are pegged in different currencies to facilitate easy payments when people can bring in money such as the rand, pula, euro and British pound," he said.

Economist Mr Kingstone Khanyile said Government could easily make use of the RBZ's daily exchange rates to implement multiple currency payments for public institutions.

"First of all Government should issue a clear directive to all payment offices under their purview that they should accept payments in the rand currency.

"The RBZ comes up with daily exchange rates of how the US dollar is trading with other currencies so these can be communicated to all Government payment offices, or simply set up electronic exchange boards displaying the daily value of the currencies."

In a statement last month on policy measures to deal with cash shortages, the RBZ noted that it was important to "restore the fundamental principles of the multi-currency system through increasing availability and usage of the other currencies within the multi-currency basket". Last week, Bankers Association of Zimbabwe president Mrs Charity Jinya acknowledged that continued rejection of the rand was unsustainable.

She told the Parliamentary Portfolio Committee on Finance that the rand should be adopted as the main transacting currency to reduce concentration risk on the US dollar.

The BAZ president said the US dollar should be reserved for making off-shore payments and local electronic transactions. RBZ statistics show that when the multiple currency regime was introduced in 2009, there was 49 percent usage each of the rand and US dollar, and two percent for other currencies.

But now, use of of the US dollar has reached 95 percent of all transactions. South Africa's rand accounts for nearly all other transactions with little to no reflection of use of any of the other currencies that Government hsa adopted as legal tender.

Zimbabwe's basket of currencies includes the US dollar, South African rand, Botswana pula, euro, Chinese yuan, British pound, Australian dollar, Indian rupee and Japanese yen.

Source - Sunday Mail