The state government in Zimbabwe has de-dollarised the economy and reintroduced local currency in bank accounts. These will be traded in electronic transfers and bond notes only, and pile more taxes on the transacting public.
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, in a monetary policy statement presented yesterday, directed banks to create nostro accounts for foreign currency transactions (nostro FCAs), which will run separately from existing bank accounts, now limited to RTGS (real time gross settlement) transactions and bond notes only.
The measures which will technically de-dollarise the economy and reduce existing FCAs to local currency accounts will take effect on October 15.
Mangudya said the Africa Export-Import Bank (Afreximbank) has agreed to provide a $500 million guarantee to the new nostro FCAs, which have been created to cater for exporters and other foreign currency earners
It means non-foreign currency earners, who wish to open nostro FCAs, would have to fully fund their accounts with foreign currency.
It also means government has indirectly admitted that bond notes and RTGS balances cannot trade at par with the US dollar due to a growing mismatch between cash dollars and bond note/RTGS balances.
Zimbabwe is staggering due to a harsh currency crisis, due to a persistent shortage of cash and foreign currency, which has given rise to an active parallel market where foreign currency, bond notes, RTGS balances and mobile money are traded.
The measures were announced to strengthen the multi-currency regime and to boost the amount of foreign currency in circulation as well as support the productive sectors of the economy.
RBZ announced the currency measures, purportedly to strengthen the multi-currency regime, currently in circulation, under a broader framework of 13 measures introduced to stabilise prices; boost the amount of foreign currency in circulation and support the productive sectors of the economy.
Measures put in place include; the provision of lines of credit for strategic imports; use of letters of credit for high-value foreign transactions and the introduction of a statutory reserve requirement to mop up excess liquidity.
Foreign truckers will now be required to purchase fuel in foreign currency. There is also an increase in mobile money transfer tax to two cents per dollar from five cents per transaction with effect from yesterday. The tax applies to transactions conducted via RTGS, mobile phones and the internet.
“Treasury introduced the intermediated money transfer tax with effect from January 1, 2003 through the Finance Act 15 of 2002. The tax was set at five cents per transaction, which was a specific tax,” Ncube said.
“However, due to the increase in informalisation of the economy and huge increase in electronic and mobile phone-based financial transactions and RTGS transactions, there is need to expand the tax collection base and ensure that the tax collection points are aligned with electronic mobile payment transactions and RTGS system.
“The information that we have so far is that in 2018, 1,7 billion transactions went through as compared to 50 million four years ago. I, hereby, review the intermediated money transfer tax from five cents per transaction to two cents per dollar transacted, effective October 1, 2018 (yesterday).
“I am, therefore, directing financial institutions, banks and Zimra [Zimbabwe Revenue Authority], working together with telecommunication companies, to extend the collection to all electronic financial transactions.”
A statutory instrument is being worked on by government, which will give legal effect to the tax adjustment and provide more details about the measures.
Units less than a dollar will be excluded from the tax.
Ncube said the tax review has been prompted by revenue considerations following the mobile money explosion that has taken place since 2016 when the RBZ launched a campaign for a cashless economy.
“It’s a fairer tax, we’re moving in line with financial innovation that we’ve seen,” Ncube said.
In the first eight months to August 31, a total of 1,7 billion transactions were recorded, according to Ncube. Most of which were from mobile money proceeds.