HARARE – Zimbabwe’s government on Monday abolished a multicurrency system that has been in force since 2009 saying only the domestic currency can only be used for transactions.
The surprise changes were with effect from Monday, according to Statutory Instrument (SI)142 of 2019 published in an extraordinary Government Gazette.
“It is hereby notified that the Minister of Finance and Economic Development…has made the following regulations; Zimbabwe dollar to be the sole currency for legal tender purposes…with effect from June 24, 2019 the British pound, the United States dollar, South African rand, Botswana Pula and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transaction in Zimbabwe,” the SI said.
The country hopes that the changes in monetary policy will help it control a huge currency black market that has seen the Zimbabwe dollar trade at 1;10 to the US dollar in the past week, from 1;2.5 to the greenback when the currency was floated in October.
There are fears, however, that the announcement could ignite a surge in panic buying among consumers, or trigger a black market of basic commodities.
At the weekend, President Emmerson Mnangagwa told the media while attending a US-Africa summit in Mozambique that a new currency would be introduced in the coming months.
Analysts said the Zimbabwe government has sacrificed industry to contain civic unrest. With a growing number of civil servant bodies pressing for the pegging of their salaries in United States dollars in response to the freefalling value of the RTGS dollar, government has moved to make the Zimbabwe dollar the sole currency for legal tender purposes in Zimbabwe effective 24 June 2019. One United States dollar was equivalent to 13 RTGS dollars as at 24 June 2019, up from an exchange rate of 1:1 in February 2019.
This move illegalises civil servant salary demands, but at the expense of business and commerce as the country gravitates back to a managed foreign currency allocation system. Critics argued that although the pronouncements were made with the objective of capacitating the market driven inter-bank foreign currency allocation system, the country’s porous legal framework and high level corruption will arbitrage on both the inter-bank system and the new legal tender framework to kill formal businesses and enrich public officials.
The new monetary policy pronouncements come at the back of a sequence of monetary and fiscal policy statements over a short timeframe, making Zimbabwe’s economic environment unpredictable and unstable.
At the end of it all, the following questions still need to be answered;
Will this policy pronouncement address the country’s foreign currency shortages?
Are organisations going to adhere to this policy pronouncement at the expense of survival?
Will the country’s populace legitimise this policy pronouncement in their salary negotiations?
Will the Zimbabwe government also dip its fingers into foreign currency remittances for individuals and employees at the inter-bank exchange rate?
Will Zimbabwe’s foreign currency black market respect this policy intervention?
Lastly, at this rate, will Zimbabweans ever trust their monetary authorities again?