The government has said the use of the United States Dollar (USD) alongside the local currency will remain in place in the next five years in order to restore confidence in the economy, in what fiscal authorities have termed “entrenching the multicurrency system.”
This comes at a time when prices of basic commodities have skyrocketed in the local currency which continues to weaken almost on a weekly basis against the greenback while there is a huge gap between the official and parallel market exchange rate.
The official exchange has all along been determined by the Reserve Bank of Zimbabwe (RBZ)’ s weekly auction floors which economists have said does not reflect the real value of the local currency.
“Government has clearly stated its intention of maintaining a multi-currency system based on dual use of the US dollar and the Zimbabwe dollar,” said Finance and Economic Development Minister, Professor Mthuli Ncube, while addressing a press conference in Harare Monday.
“However, the market lacks confidence that the multi-currency system is here to stay for the foreseeable future. To eliminate speculation and arbitrage based on this issue, the government has decided to embed the multi-currency system and the continued use of the US dollar into law for a period of 5 years.”
The interbank market exchange rate, Ncube said, will now be determined by banks on a willing buyer-willing seller basis.
“The utilisation in all economic transactions of this formal rate is now made mandatory by law,” said the Treasury chief.
“While economic agents are free to price their goods in US dollars or Zimbabwe dollars, and there are no price controls, the equivalence of US dollar prices and Zimbabwe dollar prices for a commodity should be strictly based on the current interbank exchange rate as determined by the Willing Buyer Willing Seller rate.”
He added: “No discounting of prices for payments made in US dollars shall be allowed and the law provides for strict criminal and civil penalty, including US dollar-based fines, suspension or cancellation of business/trading licences for offenders amongst other penalties.”
Ncube and the ministry secretary, George Guvamatanga however said there was no way the country could fully redollarise, adding only 30 percent of bank deposits and government revenue from taxes were in US dollars.