dyton mupawaenda
Herald Reporter
Retailers will no longer be limited to a 10 percent trading margin on the interbank exchange rate if recommendations by the Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe are accepted.
The retailers will be able to set their own exchange rates.
In the statement issued on Monday, the MPC said: “In order to support the continuous fine-tuning and further liberalisation of the foreign exchange market, with a view to guaranteeing and safeguarding exchange rate stability, it is recommended that the limit of 10 percent trading margin above the interbank rate be removed.”
The recommendation to remove the limit is part of a block of measures proposed by the MPC to bring more foreign currency transactions into the banks and the formal sector, rather than the black market, and to ensure that there is adequate foreign currency available through direct purchases and the auctions for the formal sector.
If adopted, the recommendation is expected to remove the middlemen in the black market who interpose themselves between holders of foreign currency and the shopkeepers, taking a cut and removing a slice of foreign currency from the formal market into the black market.
Presently, people often sell their US dollars to a black market dealer and use the resulting local currency in a shop, or accept an invitation from the dealer to use their local currency swipe card when buying.
There is also an expectation that retailers would reduce their US dollar prices, often set higher than should be the case in an attempt to charge more in local currency, without breaking the 10 percent margin limit.
Tuckshops, which only accept US dollars, usually charge lower US dollar prices, since they do not take into account exchange rates.
The MPC also set, from November 1, a standard foreign currency retention for exports of 75 percent, which is the present rate for most, and removed all the special dispensations in some sectors allowing a higher retention rate.
This would produce more currency to feed the wholesale and retail auctions and meet the Government’s foreign currency commitments, said the MPC.
The bank policy rate, the minimum interest that a bank is allowed to charge on loans it makes in local currency, has also been cut with immediate effect from 150 percent to 130 percent, following several months of reasonable exchange rate and price stability.
In its introduction to its decisions and recommendations, the MPC said while there has been relative stability in exchange rates and prices since June, there were emerging global risks that have to be met.
Part of this is a fall in global economic growth and a resulting fall in the prices of many minerals, with most of Zimbabwe’s foreign currency earned from exports of minerals.
The drop in export receipts had been 9 percent between the first nine months of last year and first nine months of this year.
The other major target of the MPC was to continue the formalisation of the large informal sector through a set of measures.
The RBZ’s efforts towards an ever more cash-lite economy, where people use electronic transfers rather than banknotes, needed to be stepped up.
Banks were encouraged to accelerate financial inclusion by opening more “no frills” accounts, which usually cost account holders little, so that more people in the informal sector would formalise.
This would also include more use of debit cards and other electronic payments as the informal sector formalises.
To accelerate adoption of digital payments, the MPC also “recommended that Government considers removing Intermediated Money Transfer Tax (IMTT) on transactions that are intermediated through plastic bank cards and other digital platforms”.
The committee continues to press ahead and support more use of the ZiG, the 1mg gold token backed by an equivalent amount of gold in the Reserve Bank vaults, which was introduced early this month.
“Since its introduction as a medium of exchange on 5 October 2023, the use of ZiG has been embraced widely in the economy and its continued dual use as a value preserving instrument and a medium of exchange in the economy will go a long way in supporting digitisation, financial inclusion and the overall stability of the local currency,” said the MPC.
Online Reporter