GOVERNMENT yesterday read the riot act to local authorities directing them to stop billing their services in United States dollars.
The move is seen as further attempts by the Treasury at promoting the use of the local currency.
In a statement, the Finance and Economic Development ministry issued a stern warning to local authorities and government agencies which had disregarded the directive to collect fees and levies in local currency.
The ministry also emphasised the need for compliance to promote wider use of the domestic currency.
The directive was also seen as means to maintain steady firming of the local currency against the US dollar after a huge fall experienced in May and June this year.
The country’s annual inflation rate more than doubled from May to June, to 175%, with economists indicating that severe depreciation of Zimbabwe’s struggling currency led prices to spiral.
Zimbabwe’s currency has also been showing signs of stability after its free-fall had pushed inflation to triple digits.
Last week, the Zimdollar gained for the first time this year, following a raft of policy measures implemented to stabilise it.
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It firmed 9,4% against the greenback at a weekly-run central bank auction on Tuesday last week trading at $6,326 per US dollar.
The local currency gained further yesterday, trading at an average of $5 396 to the US dollar.
However, economic analysts were yesterday divided over the move by Treasury, with some supporting government, while calling for more projects to shore up the local currency.
Renowned economist Gift Mugano raised concerns about the future of the Zimdollar and the current exchange rate stability.
Mugano argued that the apparent stability was a facade, brought about by what he termed “forced fasting” — a strategy that mops up the money supply at the expense of aggregate demand, restricts payments, and denies civil servants fair salaries.
Mugano’s concerns stem from a snap survey he conducted on civil servants’ salaries, which yielded alarming results.
He said he discovered that some civil servants and university staff members had received payslips with negative balances, sparking widespread concern about the sustainability of the current economic situation.
According to Mugano, the “fasting period” would soon come to an end with the exchange rate experiencing a significant increase.
“I want to categorically make it clear that the Zimdollar has no future and the current exchange rate stability is a false one because it has been brought about by forced ‘fasting’ — mopping money supply at the expense of aggregate demand, restricting payments and refusing to award civil servants fair salaries.
“I did a snap survey on civil servants salaries and noted that civil servants and staff at some universities have received payslips with negative balance. This is not sustainable,” he said.
However, another economist Cornelius Dube said there was nothing wrong with the directive.
“But obviously, the issue is that businesses will still use exchange rate even if they charge in local currency. Everyone is still going to price in US dollars to come up with Zimdollar prices. That is what everyone will do anyway.
“What government is trying to do is more like a signal issue, what signals are being sent to the market especially with respect to whether we are dollarising or de-dollarising,” he said.
Zimbabwe Institute of Strategic Thinkers director Tinashe Muzamindo also argued that government’s directive was a necessary step towards promoting the wider use of the Zimdollar.
“The continued use of foreign currencies for transactions can hinder the development of the domestic economy,” he said.
Muzamindo said promoting the Zimdollar as the primary currency for domestic transactions could help stimulate local business and encourage investment in the country.
He, however, acknowledged the challenges that may arise from the directive, but emphasised the need for proper implementation and monitoring.
Muzamindo also suggested that government should provide support and incentives to encourage businesses and individuals to use the Zimdollar.
In the statement yesterday, Treasury said government in May this year directed all government agencies, including local authorities, to collect fees and levies in local currency to promote the wider use of domestic currency.
However, some local authorities and government agencies have either issued notices to the contrary or continue to charge services exclusively in United States dollars, in direct violation of the law.
“The behaviour is not only in contravention of the law, but also militates against government policy. Therefore, all government agencies and local authorities are reminded to comply with the government directive with immediate effect,” the ministry said.
The City of Harare has been identified as one of the culprits.
“This behaviour not only goes against the law, but also undermines government policy, which aims to promote the use of the Zimbabwe dollar for domestic transactions,” Treasury said in the statement.
Government re-introduced the Zimbabwean dollar in 2019 after abandoning the local currency during hyper-inflationary environment 10 years early.
Government introduced a basket of currencies before resuscitating the Zimdollar as the primary currency.
The aim of re-introducing the Zimdollar was to regain control over the country’s monetary policy and address the economic challenges.
However, the process of transitioning to the new currency has not been without difficulties.
The value of the Zimdollar has remained volatile, and the country continues to face economic challenges such as high inflation and limited access to foreign currency.