Local currency bounces back

GOVERNMENT has technically de-dollarised the economy by reintroducing local currency bank accounts, which will be traded in electronic transfers and bond notes only, and piled more taxes on the transacting public.

BY TATIRA ZWINOIRA

Reserve Bank of Zimbabwe governor John Mangudya and Finance minister Mthuli Ncube during the Monetary Policy Statement presentation in Harare yesterday

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, in a monetary policy statement presented yesterday, directed banks to create nostro accounts for foreign currency transactions (nostro FCAs), which will run separately from existing bank accounts, now limited to RTGS (real time gross settlement) transactions and bond notes only.

The measures, which will technically de-dollarise the economy and reduce existing FCAs to local currency accounts, take effect on October 15.

Mangudya said the Africa Export-Import Bank (Afreximbank) has agreed to provide a $500 million guarantee to the new nostro FCAs, which have been created to cater for exporters and other foreign currency earners.

It means non-foreign currency earners, who wish to open nostro FCAs, would have to fully fund their accounts with foreign currency.

It also means government has indirectly admitted that bond notes and RTGS balances cannot trade at par with the US dollar due to a growing mismatch between cash dollars and bond note/RTGS balances.

“With immediate effect, all banks are directed to effectively operationalise the ring-fencing policy on nostro foreign currency accounts by separating FCAs into two categories, namely nostro FCAs and RTGS FCAs,” Mangudya said.

“Accordingly, all banks are directed to use their know-your-client principles to comply with this directive to separate the accounts without requiring their clients to complete any other documentation other than for new bank accounts.”

Zimbabwe is reeling under a harsh currency crisis, characterised by a persistent shortage of cash and foreign currency, which has given rise to an active parallel market where foreign currency, bond notes, RTGS balances and mobile money are traded.

RBZ announced the currency measures, purportedly to strengthen the multi-currency regime, currently in circulation, under a broader framework of 13 measures introduced to stabilise prices; boost the amount of foreign currency in circulation and support the productive sectors of the economy.

The catalogue of interim measures include the provision of lines of credit for strategic imports; use of letters of credit for high-value foreign transactions and the introduction of a statutory reserve requirement to mop up excess liquidity.

Foreign truckers will now be required to purchase fuel in foreign currency.

Finance minister Mthuli Ncube, who issued fiscal measures to support the monetary policy, also announced an increase in mobile money transfer tax to two cents per dollar from five cents per transaction with effect from yesterday.

The tax applies to transactions conducted via RTGS, mobile phones and the internet.

“Treasury introduced the intermediated money transfer tax with effect from January 1, 2003 through the Finance Act 15 of 2002. The tax was set at five cents per transaction, which was a specific tax,” Ncube said.

“However, due to the increase in informalisation of the economy and huge increase in electronic and mobile phone-based financial transactions and RTGS transactions, there is need to expand the tax collection base and ensure that the tax collection points are aligned with electronic mobile payment transactions and RTGS system.

“The information that we have so far is that in 2018, 1,7 billion transactions went through as compared to 50 million four years ago. I, hereby, review the intermediated money transfer tax from five cents per transaction to two cents per dollar transacted, effective October 1, 2018 (yesterday).

“I am, therefore, directing financial institutions, banks and Zimra [Zimbabwe Revenue Authority], working together with telecommunication companies, to extend the collection to all electronic financial transactions.”

Government is currently working on a statutory instrument, which will give legal effect to the tax adjustment and provide more details about the measures.

Units less than a dollar will be excluded from the tax.

For example, only the first two dollars of a money transfer transaction of $2,20 will be taxed.

Ncube said the tax review has been prompted by revenue considerations following the mobile money explosion that has taken place since 2016 when the RBZ launched a campaign for a cashless economy.

“It’s a fairer tax, we’re moving in line with financial innovation that we’ve seen,” Ncube said.

In the first eight months to August 31, a total of 1,7 billion transactions were recorded, according to Ncube.

Mobile money constituted the largest share of transactions.

39 Comments

  1. the reason mobile transanctions has nothing to do with any project being launched by anyone the scarcity of money in our country did that. instead of fake appraisals and incriments they should strategize in bring back cash to the public.

    1. what is money my friend? we are suffering because we dnt appreciate forms of money,,cash is part of money in as much as e-money is so embracing these measures at all levels should ease the pressure on the need for cash per ser…ppl shld desist from this cash obsession its a medieval approach to life

      1. my friend simz yu really have no clue wat true money is,,,,this cashless economy is to control peoples finances,..,its the sinister new world order,..,if you want more concrete info,,and wish more info,do watsapp me,,,.+263719389075

      2. requiring cash is not primitive like you are putting, it should be a choice to use e money or cash. even in the most developed nations where there is almost 100% automation there is still some cash in circulation, in italy there are certain points where you have to pat ten euros to enter hard cash and no electronic payment.anyway i find it absurd to try and make a fuel attendant an immigration official.this mangudya guy is doomed.

      3. if you have exactly $2.20 cash you can buy 2 loaves of bread.
        if you have exactly $2.20 ecocash, you can’t 2 loaves of buy bread. you will have to pay the government first.

  2. ED Pfe eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee.

  3. what a title!!!

  4. I am more concerned about the latest tax on electronic transactions. To carry out an electronic transaction of $1000, one is now taxed $20. It is as punitive as it draconian to the already over-taxed citizens. With all due respect to the very highly educated and probably over-qualified new Finance minister, I hope years he has spent in the affluent West has not let him lose touch of the plight of the suffering Zimbabweans. He should know better than anyone else that higher taxes further erode disposal income and adversely affect the already weak aggregate demand for goods and services. Is that what the authorities meant by the catch phrase ‘Zimbabwe is open for business’?

    1. They have no clue!

  5. I am more concerned about the latest tax on electronic transactions. To carry out an electronic transaction of $1000, one is now taxed $20. It is as punitive as it is draconian to the already over-taxed citizens. With all due respect to the very highly educated and probably over-qualified new Finance minister, I hope years he has spent in the affluent West has not let him lose touch of the plight of the suffering Zimbabweans. He should know better than anyone else that higher taxes further erode disposal income and adversely affect the already weak aggregate demand for goods and services. Is that what the authorities meant by the catch phrase ‘Zimbabwe is open for business’?

    1. Petros Magomazi

      The Zimbabwean economy is currently run by informal businesses. Informal businesses do not pay tax but they make use of government funded infrastructure and demand good services from government. It implies that the government is not collecting as much tax as they should and hence measures have to be put in place to find a way of collecting tax from the informal businesses. That is why they have decided to increase tax on RTGS and mobile transactions. The downside is that companies that are already paying taxes are also going to be forced to pay this elevated transaction tax.

      1. this will just be pushed to the final consumer of goods and services so even those companies that are already paying taxes are not really going to be affected the people who are going to feel effects of this higher tax is you are i the final consumers

  6. When you see implementation of too much controls and increase in taxes then the economy is not in good shape. Honestly this government is clueless about the economy. The 3 tier price system is now official. I think we are having high expectation from an ordinary and average leader. Can someone out there give me just 5 Highlights of ED as a Cabinet minister since 1980?

  7. The danger of appointing vanhu vasina kuvhoterwa. Havana basa nesu they think of their performance and what the outside world will say about them chete chete. Mfana uyu anofunga kuita zvakazamiwa naGono zvikabackfire kwaari zvichabudirira? Mirai muone hatina nguva taakutoridza mhere mumastoro musisina chinhu nekuda kwema FCA iwawa.

  8. Why are we being punished for using electronic money as if we have choice. Prices have gone up and no increaments as there’s no production to back it up coz no forex.. Tichatsvukira hedu….
    Tichingo vukura mobva mazoti ma sunctionz. Lets wake up pple

  9. The sad reality is that Zanu pf do not think or should I say analysis the effect of this.I will just take one example. Fuel importers they need forex to import fuel. The end user will use bond or whatever currency which they say is 1:1 with the green. The black market will not respect that and the people with economic understandings do not trust zanu pf. The financial markets works with trust. Zanu pf might try to force itself on people but it will not work. Guys from diaspora will send forex to their buddies and these guys will run to black market and get a premium rate on the black market. then goes and buy fuel at a rate of 1;1 with the greens. In the short run it might not be seen but in the long run they will see kuti vanyangira yavona.

    The sad reality is that ED is for the rural people where they can use intimidation and or force. Chamisa is trusted with the intelligent s, civilized people. If ED had common sense he should have picked up that and try to reconcile with Chamisa and gave Chamisa all ministerial that has to do with economy of the country. He could have opted to be the face of the country while Chamisa and his team vachirova basa. Manje so. Kutonga kwaro ra zvimamira

    1. I appreciate your comments but you are giving Chamisa too much credit. Why should he be given a post when he did not win the election?
      Where in the world has that ever happened? Skewed think i am sorry!!

      1. but that not the problem of the informal business. everyone wants a formal business but the leadership can not provide us with it, so zimbabwe should stop blaming the victims for everything.
        cellphone banking and internet banking should be non-taxable transctions

      2. You live in your own world

  10. All that they are talking about is just rumbling it does not make sense to the ordinary person who is the ultimate complainant. There is too much of monetary jargon that says very little at the end of it all. Shame on the presenters!!!
    Tinoda mari inotenga Full Stop.

  11. In layman terms if the bank can have diff tags for your money or should i say for your balance, what is wrong w supermarkets also having diff price tags for their products. This is preety much normalising the abnormal.

    Mangudya should remember that even unlearned pple took to the streets to warn him about bond notes now we are being armtwisted into submission of a “fake” balance. This is like firefighting fire with petrol.

    No one is sabotaging the economy but economy works naturally through the invisible hand of demand and supply.

    nway who kers we gud isu amheno ve opposition #ED_PFEEEEE

  12. Hapana munhu ane njere ano banker foreign currency yake iko zvino. Solution is to revive the industry yaka urawa ne Zanyu, Remember, you raided our foreign accounts way back and up to now you haven’t made any restitution. Only a fool will trust your regime.
    ED pfeee yamaichemera, hona yaita mamvemve.

  13. ED PFEEEEEEEEEEEEEEEEEEE KUSVIKA MATI SORRY TICHINGOTONGA TICHINGOTONGA KKKKKKK

  14. How does this guy introduce a tax, order collection to be effective on the same day and then say ‘Government is currently working on a statutory instrument, which will give legal effect to the tax adjustment and provide more details about the measures.’ What gives legal effect to the measure in the meantime and how do the role players start collecting it if they don’t have the so called ‘more details on the measure’. Really??????

  15. While this move encourages those businesses that export to maximize their output, what about the viability of those businesses that import inputs but whose products are primarily tied to a domestic market? Supermarkets, fuel importers, car repair and maintenance garages come to mind… but also manufacturers of local products with a significant foreign content. Secondly: what does such a move do to the man in the street’s (already shaken) confidence in the banking system when the value of his balance may have been effectively halved in one move? Sounds like a giant leap backwards… but perhaps ZANU PF economists can enlighten me.

  16. And all this after a self proclaimed “hugely successful” week long trip to New York.

  17. No success without pain guyz

    1. There has been enough pain!

  18. Munashe ndiwe wega nevashoma vanona semaonero ako kuti Chamisa akaruza ma ellections, asi vanhu vakaisa x wawo vanoziwa kwavakaisa. Asi izvozvo zvakapfuura . Mubvunzo mukuru ngewekuti Todii, Mtukudzi akaimba wani.Deno ndiriini ndinotungamira party ineudyire, ndairega zvinoda vanhu zvichiitwa, ndiyo FREEDOM yacho yakafira ruzhinji.Tarasikirwa ne 37 years dzekubudirira nemhaka yevanhu vari greedy and selfish.

  19. Separate FCA’s is exactly what the banks wanted to do in November 2016 when the bond notes were introduced but they were absolutely forbidden from doing do! They and you, Minister, knew what would happen!

  20. Comment…History always repeating itself. The economy is on downward spiral which clearly indicates tough times ahead. What is needed is the complete overhaul of the system.

  21. in 2002 usa congressman ron paul wrote a letter to the imf asking them why their charter disallows member countries from linking their currencies to gold,thereby allowing countries with erratic monetry policies to adopt the most effective means of stabilizing their currencies,,,,,well the congressman recieved no reply…,

  22. Seriously we are expecting someone who ran down a bank to manage the whole economy including RBZ.

  23. Well this Ncube character turns out to be another textbook economist. Whats new? Where have you seen a country with so many options for transacting? The forex paid for fuel will not see its way to the banks. Or that paid for goods in the supermarket. In a normal economy there is an exchange control act no citizen should trade forex. Not so here.The money changers must be singing Halelujah! What we now wait to see is how the rate between the $: bond:mobile:rtgs will perform. If this Ncube was serious he would round up $ changers from the streets. He wont and this, unfortunately is where the economy will be decided, on the streets!! And those with Usa will make $ while the rest of us languish. And did u hear no bread so take out the bread makers 2008is back but this time without Gono!!

  24. AM SHOCKED WITH THESE BOOKISH ECONOMIST AND SO CALLED TECHNOCRATS
    SURELY OUR LIVES ARE WORSE OFF NOW ,OVERTAXED EMPLOYEE.
    EVERY DOLLAR MY TWO CENTS IS GONE SURE HERE IYOYO GUYS
    ED MUTHULI MANGUDYA MATIURAYA

  25. mbavha dzevanhu mbavha dziye dzatanga nyika hairanwe nechigandanga

  26. The benefits of the operation code named ‘operation restore legacy’…RG IS SMILING RIGHT NOW

  27. Zimbabwe has no foreign currency reserves, Zimbabwe has no exports to cover the high import bill, no money to cover the high local expenditure. Can all those who are criticizing the new minister of finance explain kuti what should have been done. Are there people out who believed the bond is 1:1 to usd, we all knew this was going to happen whether dai iri MDC iri ini power they still would have done the same.Hapana kwavanga vachawana mari to cover the local and foreign debt. Ngati rege kunyepererana.

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