Local authorities defy Treasury directive . . . they continue charging in forex

Some local authorities are reportedly defying Government’s directive to charge all services in local currency, with some saying they haven’t received the order from the parent ministry.

Last week, Finance and Economic Development Ministry directed all Government departments, agencies and local authorities that all their services should be charged in Zimbabwe dollars. And where certain services are quoted in foreign currency, conversion should be done at the prevailing interbank market.

Local Government and Public Works Permanent Secretary, Zvinechimwe Churu, told Business Weekly that the Government was aware of resistance by some local authorities and would “soon write letters” directing” them to comply with the Treasury directive.

“But this will be a redundant directive because the circular (Treasury) is clear and the law is clear,” Churu said in an interview on Thursday. “By asking the ministry to issue a circular is asking for too much supervision . . . it’s unnecessary but we are writing (to) them,” Churu added.

Information gathered by this publication revealed that some local authorities including Harare City Council (HCC) are still insisting on US dollar payments for certain services.

HCC intends to start paying its employees’ allowances in foreign currency starting end of this month, according to people familiar with the plan. Prior to the directive, HCC had advised that certain services will be charged exclusively in forex.

While the Government allowed the use of foreign currencies alongside domestic currency until 2025, prices quoted in forex can be converted at the prevailing interbank rate. On Thursday, the Zimbabwe dollar traded at 582,82 to the US currency but changes hands for as much as $800 on the parallel market.

While many local private businesses in the past few weeks had started sidelining the local currency citing high inflation and unstable exchange rate, some measures taken to stabilise the currency had seen the local unit generally accepted again.

Multiple sources in the local government said that they had received “so many” complaints from several people complaining about resistance from some local authorities.

“It appears the directive is being ignored,” said one official who requested not to be named because in not allowed to talk to the media. People who spoke to Business Weekly also said it was “still business as usual” despite the recent directive.

“I had gone to have my (housing) plan approved at a district office in Hatcliffe (Harare) but they refused to accept Zimbabwe dollars saying they haven’t received a circular to effect the directive,” Tinashe, who declined to have his second name disclosed said.

Business Weekly managed to verify this account.

A spokesperson for Harare City Council did not immediately respond to messages on Thursday seeking comment.

Bulawayo City Council is offering 50 percent discount for US dollar payments for the rates while Masvingo Town Council has re-denominated all the debts to foreign currency.

Said an official that cannot be named for professional reasons; “BCC is still pegging payments in all currencies. The US$ component is convenient for the diaspora community who are responding well to it. Even locals are also paying in US$.”

BCC public relations department demand all questions in writing and does not respond to enquiries over the phone.

In issuing the directive, the Treasury said it noted with concern that some Government agencies and local

authorities were now advertising in the media prescribing payment for some services “exclusively in foreign currency,” George Guvamatanga, the permanent secretary in the finance ministry said in a circular last week.

The Treasury can, however, grant exemptions.

The directive is part of government measures to promote the use of local currency.

Some of the measures already taken include payment of mining royalties up to the limit of 50 percent in local currency. Since February 2019, mining companies had been required to pay mining royalties in foreign currency. All domestic taxes due from exporters on their export receipts are also now payable in both foreign and local currency.

Guvamatanga said Section 78 (1)r of the Public Finance Management Act empowers the Treasury to prescribe or issue instructions and directives to ministries, weather individually or collectively concerning the determination of any scales of fees, other than charges or rates relating to revenue accruing in the Consolidated Revenue Fund.

He said despite the government allowing the use of foreign currencies, any services by the Government agencies and local authorities should be in local currency at the prevailing interbank rate. Guvamatanga said it was illegal for such entities to ask for payments in foreign currency.

Finance and Economic Development Minister Professor Mthuli Ncube, said the measures reflected the Government’s commitment to promote the wider use of the Zimbabwe dollar and to continuously strengthen the economy so as to build long-lasting macro-economic stability. In June 2019, Zimbabwe scrapped the multiple currency regime introduced in 2009 after the previous local currency had been rendered worthless by devastating hyperinflation, which reached 500 billion, according to the International Monetary Fund. The introduced the Zimbabwe dollar as the sole legal tender was meant to stabilize prices and improve the country’s competitiveness. In March 2020, the Government allowed people with free funds to use their hard currency to pay for goods and services for easier transactions following the outbreak of the coronavirus pandemic. The Zimbabwean dollar, composed of the electronic Real Time Gross Settlement (RTGS), bond notes and coins been losing value against the US dollar.

In June this year, the government legislated the continued use of multiple currencies until 2025.

The market’s lack of confidence in multi-currency was causing “us problems” Mthuli said.-ebusinessweekly