The Sunday News
Harare Bureau
The Reserve Bank of Zimbabwe has enough reserves to satisfy the foreign currency requirements of all legitimate businesses and no company needs to go to the black market to pay for imports, RBZ Governor Dr John Mushayavanhu said yesterday.
At the same time the Government is still working out which taxes will be paid in ZiG and will be making adjustments to regulations so that those holding the old Zimbabwe dollar banknotes will be able to deposit the lot without problems, even if the 21-day deadline has to be extended, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, told Parliament on Wednesday.
Dr Mushayavanhu said businesses should approach their banks to buy ZiG or US dollars, instead of promoting the black market which is now charging up to ZiG18 when it sells US$1, although paying a lot less to buy that US dollar, something much closer to what the banks pay because of the very high margins between buy and sell rates on the black market.
The Reserve Bank has adopted a market-determined system for setting exchange rates, with the auction system being replaced by a refined interbank foreign exchange market through which the commercial banks buy foreign currency from willing sellers and sell it to willing buyers, with the margins far lower than in the black market. The weighted average of the rates at each bank form the interbank rates.
In an interview with Zimpapers Television network (ZTN) yesterday, Dr Mushayavanhu was confident that the ZiG would turn the tables against the black market, as the new local currency would not budge to the US dollar.
He allayed fears that the ZiG is now taking a battering from the US dollar, saying it is a matter of time before those with ZiG will start controlling the prices.
“I do not understand why would anyone go to the black market when we have said . . . if you have a legitimate foreign currency obligation to pay be it a service, be it school fees, be it import of goods, you will be able to get your money at your bank on a willing seller-willing buyer,” he said.
He discouraged people from trading at the parallel market when they knew the true value of the ZiG.
“Very soon the opposite is going to happen as I told you,” said Dr Mushayavanhu. “People who are holding ZiG are the ones who are going to be controlling the price.”
The Reserve Bank would itself help feed the market with the 25 percent surrender export earnings. Now there is adequate foreign currency reserves to cover all import requirements, so legitimate businesses did not have to turn to the black market.
When asked why the bank did not put measures for ZiGs to be able to buy fuel and pay rentals among other huge services that are demanding foreign currency, Dr Mushayavanhu said it was not necessary considering the amount of the local currency in the economy.
“The economy is 80 percent dollarised and I have said this before. Right now if I search the pockets of the people who are the audience here, I am likely to find for every US$100, $80 will be in real US and $20 equivalent in local currency,” he said.
“That is the nature of the things. Unless you are saying the 80 percent that you have is not enough to pay for your rent and only the 20 percent that is ZiG is the one that should pay for rent and nothing else.”
Dr Mushayavanhu also urged banks to finalise currency conversion by the end of this week.
This comes at a time when the country has introduced a new currency, with new notes expected in circulation on April 30.
“We are urging our banks to speed up the processes of conversion, but banks are using core-banking systems that have been provided by different vendors,” he said.
“Some vendors were quick to convert while others did not even get their conversions until Saturday evening. So, we have allowed banks to continue the conversion processes, but obviously we need to ensure that before the end of this week every bank is online and customers are able to make transactions.”
Presenting the 2024 Monetary Policy Statement in Harare last week, Dr Mushayavanhu, said a transparent price discovery mechanism was now in place in the interbank market and the bank would continue to provide trading liquidity to the market using the 25 percent surrender proceeds from exports.
He was not worried about the black market, saying he had enough tools and reserves to back the new currency, challenging those sworn to operating in the black market and fuelling exchange rate volatility to dare and see if they could hurt the new domestic unit of transacting.
Going by the current total reserve money in circulation of Z$2,6 trillion at the point of conversion to the ZiG, the equivalent of US$80 million, the RBZ boss said he had enough foreign currency reserves to meet external invoices while his total reserve currency war chest guaranteed three times cover once the gold reserves were taken into account as they provided 200 percent cover.
Briefing Parliament on the ZiG and answering questions, Prof Ncube told the chairperson of the Portfolio Committee on Budget, Finance, Economic Development and Investment Promotion, Cde Clemence Chiduwa, that the Government was already working on the support measures to back the ZiG.
“We have a few, but I should not announce them here in Parliament. I will just give an indication. What we have announced for sure is that 50 percent of the company taxes, corporate taxes will be in ZiG to increase the demand for our currency.
“We will be very specific when we make the announcement as to which fees and which taxes will be paid in ZiG beyond the request that corporates pay in domestic currency. We will make an announcement in the fullness of time. I will beg for indulgence on this one and not to make it in Parliament today but we already have an idea,” Prof Ncube said.
In the monetary policy statement, Dr Mushayavanhu said payment of taxes or a portion of them using the ZiG was one way of creating demand for the new currency and promote its use.
The Finance Minister, also told the parliamentarians that the RBZ will reconsider its requirement that people wishing to deposit Z$100 000 cash explain their source of the money, since the amount was far too low, being worth around US$3.
“We should not be bothering depositors. Certainly, that is a good point,” he said.
He said banks will continue to accept these deposits of Zimbabwe dollars in cash for 21 days after April 30 but added that there was a possibility to extend the deadline.
“I have been made aware that we may even need to extend that period. That is okay so that we can give our citizens, especially in the rural areas that need to travel and be able to convert their Zimbabwe dollars into ZiG currency,” he said.
