RBZ reveals roadmap for de-dollarisation: Zimbabwe’s transition away from US dollar unveiled

RBZ Governor Dr John Mushayavanhu

RESERVE Bank of Zimbabwe (RBZ) Governor, Dr John Mushayavanhu has expressed optimism that the country’s de-dollarisation thrust will succeed, amid projections that the foreign currency black market that is notorious for fuelling exchange rate volatility, inflation and macro-economic stability will gradually die before 2030.

De-dollarisation is a process of moving away from the reliance on USD as the chief transacting currency to the newly introduced Zimbabwe Gold (ZiG). RBZ, a fortnight ago, unveiled ZiG as part of several policy measures to address exchange rate volatility, curtail inflation and restore macro-economic stability in the country. ZiG will circulate alongside a basket of other currencies, and the public has up to April 30 to convert their Zimbabwe dollars to the new currency.

ZiG’s value will be secured by both the quantity and worth of gold and other precious metals, along with foreign currency reserves.

Fielding questions during a Zimbabwe National Chamber of Commerce (ZNCC) breakfast meeting held in Mutare yesterday, Dr Mushayavanhu said currently 80 percent of transactions in the country are being done in USD, but the gradual de-dollarisation process will see the margins being reduced on year-to-year basis.

“The market is dollarised to the extent that 80 percent of all transactions currently happening in the country are in USD, and only 20 percent are in local currency. Government has said 50 percent of transactions should be done in local currency, so they are well ahead of us.

“The Central Bank has come up with a roadmap towards de-dollarisation, and as we go towards 2030, we want to do it gradually so that maybe by the end of the year, we are at 70/30, in 2025 we are at 60/40, then in 2026 we are at 50/50 and after that we will not even care to monitor it because it will happen on its own.

“You will also be seeing Government reviewing the amount you pay in ZiG for tax as we go along on that roadmap,” he said.

Dr Mushayavanhu said the imaginary USD parallel market rates being talked about are non-existent.

“As far as the parallel market is concerned, some of these rates that you are hearing are mere quotations. We have tested this system ourselves. As you know we have the Financial Intelligence Unit, and we unleashed them on the market to pose as forex buyers. For example, we tasked them to buy US$100 000 at whatever rate, and they were ready to pay. The FIU team requested to see the US$ first before transferring the funds in the individuals’ bank accounts. From 8am to 8pm they were saying we will avail the money, and at the end of the day nothing materialised.

“If these transactions are happening for US$5 and US$10 for people who want to buy airtime, then it is normal in any economy. I don’t think we have a parallel market for meaningful business transactions,” he said.

Asked why they have roped in the police to help curb the parallel market by arresting street money changers, Dr Mushayavanhu said the law enforcement agents are there to promote the rule of law and order.

“But having said that, people are also saying why are the police being heavy handed in dealing with forex currency traders. From where we sit as a Central Bank, anyone who is trading in forex should have a licence. It is the duty of the police to intervene and arrest those committing offences. The police are there to arrest them because it is illegal for them to sell or buy forex without a licence.

“You will be arrested if you do that. If you try to sell your tomatoes just outside this hotel, the municipal police will arrest you because that is not acceptable. The same is happening to illegal foreign currency dealers,” he said.

Dr Mushayavanhu said the parallel market will eventually die a natural death during the course of the de-dollarisation roadmap.

“As the Central Bank, we think that the parallel market will die a natural death,” he said.

Dr Mushayavanhu said estimated income tax is paid on quarterly instalments – (QPDS) quarterly payment dates – March, June, September and December.

Dr Mushayavanhu said ZiG is not only strengthening, but stabilising.

“ZiG is a new currency fully backed by gold and other precious minerals. We are projecting that ZiG will be stable. The exchange rate will not move. In fact, if you look at what has been happening from April 5, ZiG has been strengthening.

“The market has been influenced by the price of gold that has been going up which means that ZiG should naturally strengthen because its major anchor is gold. That is not because the Central Bank has been interfering with the process or has said anything,” he said.

The RBZ chief said they are engaging fuel suppliers so that fuel can be purchased using ZiG, and the outcome of the engagements will soon be made public.

“On the issue of ZiG buying petroleum products, we are currently seized with negotiations with players in the industry so that it becomes a possibility. We should also be aware that players in that industry are also corporate citizens, and come June they will also have to remit to Government their QPDs in ZiG,” he said.

Dr Mushayavanhu said payments to contractors for food imports and civil servants have nothing to do with runaway parallel market rates.

“Contractors are paid by Government mostly in USD. If they are paid in ZiG, it is from the stock of local currency reserves in the treasury, and not that money is being printed specifically for that. Treasury cannot borrow to pay contractors. If they are using money that is already in circulation, which is controlled, I do not see how that can cause ripples.

“As regards to food imports in a semi-dollarised economy, 80 percent of transactions are in USD. What it means is that for you and me, our food requirements, even if it will be imported, it can be done by the private sector.

“National Foods can use money in their FCA to import maize-meal and sell it to you in USD because we are in a multi-currency system. The vulnerable ones are covered by the treasury. Yes, the El Nino phenomenon is there, but its impact on the exchange rate and on ZiG is minimal,” he said.

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