Govt to compensate depositors for exchange losses

Prof Mthuli Ncube - Zim Dollar

Harare, (New Ziana) – The government has mobilised US$150 million to compensate depositors and pensioners affected by currency reforms implemented since last year.

Among the currency reforms implemented by the government included re-introducing the Zimbabwe dollar and removing the 1:1 peg of the USD to the local currency.

Following the removal of the peg, the value of the local currency was initially determined by interbank activities before the adoption of the Dutch weekly foreign currency auction system.

Finance and Economic Development Minister Mthuli Ncube said: “As part of a broader reform process under the TSP, Government through the Central Bank introduced market determined exchange rate through the Monetary Policy of (SI 33 of 2019) on 20 February 2019.

This entailed transition from exchange rate of US$1: RTGS$1, initially to US$1: RTGS$25 and thereafter determined by the interbank market activities.

“This transition resulted in currency losses to small and vulnerable households with deposits less than US$1 000 in the bank. The movement in the exchange rate from US$1:RTGS$1 to US$1:RTGS$25 resulted in a loss for such depositors.”

“Therefore, government has made a decision to compensate the small and vulnerable depositors who had US$1000 and below, for the exchange rate movement loss from US$1:RTGS$1 to US$1:RTGS$25, with resources equivalent to US$75 million. The resources will be administered by the Deposit Protection Corporation (DPC),” he said.

Ncube said pensioners were also similarly affected by the transition.

“They too will be compensated with resources equivalent to US$75 million, which will be co-managed by government and the Insurance Pension Commission. This arrangement excludes recommended compensation under the Smith Report.”

He said the implementation of a previous compensation framework for pensioners for losses suffered before 2009 was also being pursued.

“The Commission of Inquiry’s recommended compensation framework for loss of value suffered during the pre-2009 period was slowed down by the 2019 currency reforms. However, IPEC has registered significant progress on implementation of the compensation schemes in response to 2019 currency reforms through ensuring an equitable allocation of revaluation gains arising from currency reforms,” he said.

Meanwhile, Ncube said government was also in the process of mobilising resources to compensate former white commercial farmers in line with the Global Compensation Deed signed in August.

Compensation under this agreement is for farm improvements only and is in line with the Constitution.

“As part of resource mobilisation for compensation, government is engaging a financial advisor to explore models for raising the requisite resources without compromising fiscal, debt and overall growth objectives,” he said.
New Ziana