‘De-dollarisation plan now in place’

THE Government says it has developed a de-dollarisation roadmap that entails measures to promote the wider use of the country’s new currency, Zimbabwe Gold (ZiG).

This comes after Reserve Bank Governor Dr John Mushayavanhu introduced the new legal tender on April 5, 2024, to replace the Zimbabwe dollar.

Dr Mushayavanhu recently said the ZiG now accounted for 30 percent of transactions in the economy, from roughly 20 percent before April.

In the few months since its introduction, Zimbabwe’s new unit of account has managed to tame exchange rate volatility and anchor low inflation.

A growing number of retailers and manufacturers are now accepting the domestic currency for payments while pricing their products using the official exchange rate.

Information, Publicity and Broadcasting Services Minister Jenfan Muswere told the 24th Post Cabinet press briefing that Finance, Economic Development and Investment Promotion Minister, Professor Mthuli, indicated to Cabinet that the de-dollarisation strategy was now in place.

While the US dollar has been instrumental in managing inflation, its use is not sustainable given limitations associated with its availability to influence desired levels of growth.

Authorities can influence economic growth using various monetary instruments, including interest rates and money supply.

Zimbabwe’s capacity to generate adequate levels of US dollar liquidity remains constrained following decades of economic challenges and the impact of illegal Western sanctions, which also limit access to low-cost foreign credit.

The US dollar, one of the strongest currencies globally, is also not an ideal unit of account given that it is too strong a currency for a developing economy like Zimbabwe’s, meaning it makes products made in the country less competitive, which restricts economic growth.

Existing legislation provides for the multicurrency to run until 2030.

The Government also indicated that it was looking at concerns constraining the local industry.

“To promote the uptake of plastic money, the Reserve Bank of Zimbabwe will strengthen the mandatory licencing requirements for all business operators to have a bank account and Point of Sale (POS) machine under the Shop and Shop Licencing Act, and deploy inspectors to curb misdemeanours that militate against price stability and availability of basic commodities,” Dr Muwsere said.

Zimbabwe has used the multicurrency regime, dominated by the US dollar, since 2009 after its then Zimbabwe dollar had been ravaged by hyperinflation.

Authorities last measured the country’s annual inflation at 200 percent in July 2008, but the International Monetary Fund said inflation peaked at 500 billion percent.

Several monetary and fiscal measures, including maintaining a tight monetary policy stance, elevated bank policy rate, fiscal consolidation and payment of duties, statutory tariffs and charges in local currency have been instituted to promote the local currency.

Meanwhile, the Cabinet meeting also deliberated on the growing menace of smuggled and counterfeit goods in the domestic market.

The products pose unfair competition and hinder the growth of the local industry since they do not pay any taxes or import duties.

In response, the Government said it would take a more proactive approach to address the challenges, including increasing the number of border patrols and inspectors, as well as implementing a ‘whole of Government approach’ to plug leaky borders.

“Penalties are being enforced against all perpetrators of unjust price hikes, manipulation of the ZiG currency, smuggling, and all forms of unfair trade practices,” Minister Muswere said.

Further, the Government announced plans to revise the fine structure for various offenses related to smuggling and counterfeit goods.

The current minimum fine will be increased from US$200 (level 5) to a new maximum fine of up to US$5 000 (level 14) or the ZiG equivalent.

The Government will also rationalise and consolidate the licensing process related to the trade and importation of goods to make the process convenient and effective for businesses and individuals engaged in these activities.

The minister also said the Government had noted the underutilised industrial capacity and unused assets lying idle across the country.

“An inter-ministerial task force will be established to focus on coordinating the identification of idle and abandoned industrial infrastructure spaces.”-herald