BY FIDELITY MHLANGA
GOVERNMENT has authorised the pricing of goods and services in both the local currency and the United States dollar, barely a year after ditching the multi-currency regime.
“It is hereby notified that His Excellency the President has in terms of section 2 of the Exchange Control Act [Chapter 22:05] made the following regulations. The Exchange Control Exclusive use of the Zimbabwe dollar for Domestic Transactions Regulations 2019 published in Statutory Instrument of 212 of 2019 are amended by the insertion of the following section after section 6; Dual Pricing and Displaying and Quoting and Offering of Prices Goods and Services. Any person who provides goods or services in Zimbabwe shall display or quote or offer such goods and services in both Zimbabwe dollar or foreign currency at the ruling exchange rate,” reads Statutory Instrument (SI) 185 of 2020 released on Friday.
Last June, authorities made a surprise return to the inflation prone Zimdollar after a 10-year dalliance with the multicurrency system.
The local currency has rapidly lost value to trade at 72 to the greenback, while inflation has skyrocketed to 737,3 % in June.
Analysts say the new rules are a tacit acknowledgement that Zimdollar’s return was ill-thought.
Since the return of the local currency, market confidence has been low with the heavily informalised economy preferring to transact in hard currency.
The Reserve Bank of Zimbabwe (RBZ) last week said pursuant to its statement of June 17, 2020 directing providers of goods and services to display, quote or offer prices for such goods and services in Zimbabwe dollar and foreign currency at the ruling market exchange rate as determined by the foreign exchange auction, a significant number of business entities had taken heed.
“Regrettably, some business entities have not complied with the moral suasion directive. With the amendment of the law now having been effected through Statutory Instrument 185 of 2020 published on July 24, 2020, the law will now take its course in respect of non-compliance,” RBZ said in a statement.
According to the central bank, since the commencement of the forex auction system on June 23, a total of US$71,1 million has been traded, with the number of bids increasing from 92 per auction to 290 by last week.
Funds allotted were mainly for productive sector import requirements, including procurement of raw materials and packaging (US$32,1 million), machinery, plant, equipment and spares (US$18,2 million) procurement of medicines, chemicals and consumer goods (US$16,5 million) and services (US$4,3 million).
“Priority shall continue to be given to productive sector imports while service and capital payments will be restricted to no more than 20% of auction allotments. Bids for funding legacy foreign exchange obligations and/or blocked funds will not be eligible,” RBZ said.
The central bank said a payment plan to expunge blocked funds was being developed.
Individuals and entities with adequately funded foreign currency accounts (domestic or foreign nostro) were not eligible to participate on the auction.
“While a significant number of bidders have complied with the foreign exchange auction rules, a few have been found wanting for various reasons ranging from failure to abide by exchange control regulations and failure to disclose to their bankers their foreign currency account balances, especially multi-banked entities,” RBZ said.