Zimbabwe Scraps 10% Retail Premium on Foreign Currency Exchange Rates

Spread the love

HARARE – Zimbabwe has officially abolished the 10% premium previously permitted for retailers on the official exchange rates between foreign currency and the Zimbabwean dollar (ZiG).

Under the new regulations, all sellers of goods and services in Zimbabwe are now mandated to utilize the average interbank selling rate or face severe penalties.

According to Statutory Instrument 81A of 2024, Exchange Control (Amendment of Schedule to Exchange Control Act) Notice, 2024, gazetted recently, the amendment lays out the new requirement and the civil penalties applicable to defaulters.

Finance, Economic Development, and Investment Promotion Minister Mthuli Ncube enacted the amendment after consulting President Mnangagwa, in accordance with the Exchange Control Act.

The interbank selling rate, marginally higher than the interbank mid-rate, serves as the official single rate, currently standing approximately 2.5% higher. It represents the weighted average of the daily price commercial banks charge when selling US dollars and other foreign currencies.

As outlined in SI81A, any individual or entity selling goods or services at an exchange rate exceeding the prevailing average interbank foreign currency selling rate published by the Reserve Bank of Zimbabwe will be deemed guilty of a civil infringement.

Penalties for non-compliance start at a minimum of ZiG200,000, escalating proportionally if the foreign currency involved surpasses that value.

Additionally, delayed payments incur extra penalties of five percent per day of the civil penalty.

The move to abolish the retail premium comes after the launch of the ZiG five weeks ago. Reserve Bank Governor Dr. John Mushayavanhu previously signaled the necessity of eliminating the premium, despite its legality at the time.

Criticisms of the retail premium were echoed by the International Monetary Fund (IMF) in their latest report on Zimbabwe, denouncing it as an unnecessary distortion of market rates.

Both the IMF and the local business sector advocated for the elimination of auctions, favoring exchange rates determined solely by commercial banks, a transition formalized with the introduction of the ZiG.