“Exchange rate is one of the most sensitive instruments, which can build or completely destroy market confidence alongside interest rate policy.”
The Government of Zimbabwe has gazetted new regulations, Statutory Instrument 127 of 2021 to compel businesses to peg prices of goods and services in line with the official exchange rate.
According to the latest Statutory Instrument 127 of 2021, gazetted under Presidential Powers (Temporary Measures) (Financial Laws Amendment) Regulations, 2021 corporates and institutes refusing to transact in the local dollar will also be penalized.
Statutory Instrument 127 of 2021, gives the central bank powers to impose the penalties in the event of default in complying with Exchange Control regulations that govern use of funds obtained from the Forex auction.
Under the new regime, corporates will be fined $50 000 or its equivalent in foreign currency for refusing to take payment in local currency at the official exchange rate.
Financial institutions with clients that fall foul of the regulations will also be fined. Those found guilty of diverting the forex obtained from the auction for other purposes will now be a punishable offence attracting a penalty of $1 million or its equivalent in foreign currency.
Accordingly, businesses trading at the forex auction will now be required to state the purpose for which they require the forex resources.
Also gazetted under Statutory Instrument 127 of 2021 is penalisation of natural or legal person guilty of being a seller of goods or services not authorised by law to charge for them exclusively in foreign currency.
This includes businesses and individuals that refuse to allow any buyer to tender payment for them in Zimbabwe dollars at the ruling exchange rate.
Since its introduction last year in June, the weekly Foreign Currency Auction Trading has received wide endorsement by the private sector and is credited for stabilising the exchange rate, which has led to price discovery.
The local dollar has remained stable against the US-dollar, trading at 1:84,71 this week with negligible fluctuations, according to the Reserve Bank of Zimbabwe.
However, some businesses have been quoting prices above the official exchange rate despite benefiting from the forex auction platform.
Others, mainly those operating in the informal sector, refuse local dollar transactions in favour of forex and would levy heavy premiums on those using Zim-dollar cash or electronic money.
Finance and Economic Development Minister, Professor Mthuli Ncube, says the new regulations have been put in place to protect consumers from being abused by manipulative business players.
He told tourism players during a brief with sector players Thursday that the new fines and penalties would help curb speculative behaviour and close arbitrary opportunities that threaten the stability achieved so far.
“We really want to curb this and make sure consumers are not hurt or exploited. The economy is stable and the exchange rate is stable,” said the minister.
ZNCC chief executive officer, Mr Christopher Mugaga, expressed his reservations on Twitter.
“Exchange rate is one of the most sensitive instruments, which can build or completely destroy market confidence alongside interest rate policy. @SI137 of 2021 is not implementable unless everyone had access to forex-auction,” he posted