Government will entrench the multi-currency system by giving it legal levers to continue until the end of the first phase of the National Development Strategy (NDS) in 2025 as authorities put to bed the growing uncertainty over the sustainability of a dual currency system.
Furthermore, the same will be done on entrenching the interbank exchange in law.
Addressing media this morning, Finance and Economic Development Minister, Prof. Mthuli Ncube issued a cocktail of measures meant to buttress the multi-currency system as well boosting market confidence.
“Government has decided to entrench the multi-currency system in law. The market’s lack of confidence in the multi-currency system is causing us challenges and I want to assure you this multi-currency system is here to stay into the foreseeable future and to eliminate any speculation and arbitrage based activities on this system, government has decided to embed this system and make sure the USD is used as a transition currency in law for a period that includes the 5 years that covers the NDS 1 period.”
NDS-1, a government strategy designed to build foundation for the stabilization of key macro-economic fundamentals is set to conclude in 2025 with the second phase ending in 2030.
Government in 2020 stated that the de-dollarization of the economy would take five years, and apparently, this remains in line with today’s policy pronouncements.
There was growing market uncertainty over the sustainability of the multi-currency system at a time the local currency was rapidly losing value and the market skewing towards USD.
Market analysts have been calling for clarity from monetary authorities on the currency question.
The Minister said the lack of policy guidance with regards to the multi-currency system was weighing down on confidence in the local currency as reflected in the exchange rate movements leading to rising inflation.
“The interbank market exchange rate is now being determined by banks on a willing buyer willing seller basis. Utilization in all economic transactions o0f this formal rate is now made mandatory by law. While economic agents are free to price their goods in ZWL or USD, the equivalence of USD price and ZWL price for commodities should be strictly based the current interbank exchange rate as determined by the willing seller willing buyer rate,” said the Minister.
Among other measures issued to bring stability in the pricing regime across the market is the immediate disbursement of maize and wheat to millers from the Grain Marketing Board to address supply disruptions.
Government will release 7 000 MT of maize that has already been paid for and a further 25 000 MT to satisfy the market. An additional 27 000 MT thereafter from the Strategic Grain Reserve will be released to millers.
About 21 000 MT of wheat will also be released to millers with immediate effect.
