Government has with effect from today deregulated the use of foreign currency in the economy, a development that has spelt an end to a 10 year multi-currency regime adopted in 2009.
The move has cast a trail of anxiety on the market, with most retail outlets yet to oblige to the latest Statutory Instrument (S.I 142 of 2019) which will see the US dollar, the Pound Sterling, South African Rand and the Botswana Pula among other currencies ceasing to be legal tender in the country, establishing a single currency system of the Zimbabwean dollar(RTGS dollar).
“Subject to section 3, with effect from the 24th June, 2019, the British pound, 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 transactions in Zimbabwe,”
“Accordingly, the Zimbabwe dollar shall, with effect from the 24th June, 2019, but subject to section 3, be the sole legal tender in Zimbabwe in all transactions,”
“References to the Zimbabwe dollar are coterminous with references to the following and to no other forms of legal tender or currency- the bond notes and coins referred to in section 44B of the Act: and the electronic currency prescribed for the purposes of section 44C of the Act, that is to say the RTGS dollar,” read the Instrument.
Analysts have welcomed the development as a major step towards the rebalancing of the economy now that a single, local currency is established.
Market watchers say the over-reliance on the USD and Rand currencies for local payments was exerting exchange rate pressures on the local RTGS dollar.
“This de-dollarization entails that we are stopping the use of other currencies. Officially we are de-commissioning the multi-currency regime. The foreign currency will be used only for international payments,” economic expert, Pepukai Chivore told 26Chat Business.
While a wave of uncertainty and speculation has engulfed the market, there is an air of optimism over price consistence likely to be brought about by the pronouncement.
Most retail outlets have been charging their products in USD currency, while those charging in RTGS dollar were basing their prices on the USD parallel market exchange rate.
The situation had created a three-tier pricing system in RTGS dollar, USD and Rand.
However, the latest S.I is expected to exert more pressure on demand for foreign currency albeit not for local payments, but for store of value as the local currency will still encounter confidence deficiency.
“We don’t have sufficient liquidity in the economy and in any case, the S.I will work towards removing the sanction of USD and any other currencies for transaction purposes but as a store of value you cannot stop that, so people will still demand USD as a store of value so demand will continue but not for transaction purposes,” said Chivore.
As of time of publishing, retailers were yet to establish the extent the implications of the pronouncement will bring to the market.
“We are still studying the implications of the announcement and we should be able to comment and issue a statement in the next 24 hours,” Zimbabwe Retailers Association president Denford Mutashu said.