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Golden Sibanda and Mike Tome
THE United States dollar will remain an integral part of Zimbabwe’s payment system until 2030 after President Mnangagwa yesterday extended the tenure of the multi-currency regime beyond the initially planned cut-off period of 2025.
The development will boost investor confidence and bring certainty to planning for businesses, given some financial institutions had started scaling down US dollar lending over concerns regarding the fate of foreign currencies after 2025.
In June last year, the Government promulgated Statutory Instrument (SI) 118A of 2022, which provided for the multi-currency system to run for five years.
The SI entrenched into law the multi-currency regime for the entire period of National Development Strategy 1 (NDS1), a five-year economic blueprint adopted by the Government in 2020 and runs through to December 2025.
Captains of industry and commerce as well as economic analysts yesterday welcomed the policy decision saying this will engender market confidence and ensure certainty in planning, which is critical for strong economic growth and development.
Zimbabwe used the multi-currency regime between 2009 and 2019, and thereafter a combination of foreign and domestic currencies, as it explored strategies to allow for the sustainable introduction of exclusive use of the local currency.
The southern African nation scrapped the exclusive use of the domestic currency in February 2009 due to hyperinflation caused in part by the impact of economic embargoes imposed on Harare by Western countries in 2001 after the Government repossessed land from a few white farmers to resettle the landless majority.
President Mnangagwa has since extended the duration of the multicurrency regime to 2030, by which Zimbabwe is expected to have achieved upper middle-income status, in terms of Section 2 of the Presidential Powers (Temporary Measures) Act.
“His Excellency, the President, in terms of Section 2 of the Presidential Powers (Temporary Measures) Act (Chapter 10:20) hereby makes the following regulations:-
“These regulations may be cited as Presidential Powers (Temporary Measures) (Amendment of Exchange Control Act) Regulations, 2023. The Exchange Control Act (Chapter 20:05) is amended in Section 11 (Civil Penalties Orders) by the repeal of Subsection (2a) and substitution of-
“(2a) The provisions of the Schedule, in so far as they expressly or impliedly permit the settlement of any transaction or the payment for goods and services in foreign currency, shall, notwithstanding Statutory Instrument 142 of 2019, be valid until 31st December 2030,” he said in a notice published in the Government Gazette.
Statutory Instrument 142 of 2019 provided for the Zimbabwe dollar as the sole legal tender for Zimbabwean transactions.
The latest provisions will give the Government ample time to address key macroeconomic issues critical for the smooth and sustainable reintroduction of exclusive use of domestic currency, which is critical to drive meaningful growth.
While the use of a multicurrency regime, and in Zimbabwe’s case one dominated by the US dollar, provided stability in an environment often plagued by the impact of headwinds like Covid-19, droughts and unforeseen global shocks, faster and sustainable growth remains a challenge due to an overly strong greenback.
The use of multicurrency also limits the extent to which the central bank, which is in charge of currency issues, can use monetary policy to influence economic growth and influence the behaviour of other key fundamentals like inflation.
Confederation of Zimbabwe Industries (CZI) president Mr Kurai Matsheza said: “We are happy that what we have been asking for has been answered, we hope it will bring some stability and certainty. But a successive plan needs to be tabled because 2030 is not very far away, so we have to work on what comes next after 2030”.
Economist, Mr Persistence Gwanyanya, who is also a member of the Reserve Bank of Zimbabwe’s Monetary Policy Committee said: “The policy maker has answered the market’s call about multiple currency, curbing the uncertainty on the multicurrency system, the expiry date was approaching.
“This nurtures confidence, de-dollarisation is going to be market-driven, it is not going to be dictated (to the market by the Government), monetary authorities should now seek optimal currency mix”.
The chief executive of United Refineries, Mr Busisa Moyo, also welcomed the extension of the tenure of the multi-currency regime.
“This is a positive development for corporates & economic actors. Prior to this USD could only have a tenure of up 30 June 2025 or earlier. The work of a dignified, fungible & stable local currency ZWL or ZWX still remains to be mapped out carefully & effectively,” said Mr Moyo who is also the chairman of the Zimbabwe International Trade Fair Company.
Former banker and businessman, Mr Nigel Chanakira, hailed the latest development, describing it as good for planning.
“Perhaps now the banks can commence business and give six year loans & mortgages in US dollars. Government may also be able to issue six year debt instruments and allow the market to create a 1-6 year yield curve,” he wrote on X (formerly Twitter).
Online Reporter