Zimbabwe is currently using multiple currencies so it is illegal for anyone to insist on payment in United States dollars, Deputy Finance Minister Clemence Chiduwa told the Senate yesterday, addding that the government was doing everything to ensure that this anomaly is rectified so that there is market discipline.
Chiduwa was told that this practice was rampant, even in rural areas.
“Hon. Minister, you responded to the question but you did not address the key issue in the question that in some shops you are told that you cannot buy goods if you do not have the US dollar. The question is; what happens and how are you going to address that because that person is paid in Zim-dollars? I saw that happening in rural areas and wondered how the elderly are surviving and how they get the US dollars to buy commodities in shops. How are you going to address that?” Senator Elias Mudzuri asked.
Chiduwa responded: “I would like to thank Hon. Sen. Mudzuri for the question that there are people being denied commodities because they do not have USD. I believe this is a problem of coverage and we are not represented in all areas.
“The Financial Intelligence Unit under the RBZ works with the law enforcement agents. We have a Ministry hotline which is published in newspapers where cases similar to this are reported. When we receive such information or reports, we update our records.
“As of now, we have penalised some companies for amounts ranging from US$50 000-60 000.00 – these were charging in USD exclusively. We are fining perpetrators and it is a matter of time, we are going to allow the hand of the law to stretch far and wide so that we correct this anomaly so that there is market discipline. “
Several legislators have argued that fining these business enterprises does not work because they have too much money. They advocated instead that the government names and shames them by publishing their names in the media.
Q &A:
HON. SEN. PHUGENI: At least the Minister of Finance is here, so accordingly the question goes to him. The Senate has been correctly asking about the runaway inflation and what the Government is doing to cushion our people against it. Madam President of the Senate wrote a letter to the Ministry to come and address the Senate on the matter. The Minister responded by saying he requests an opportunity to address the National Assembly first, thereafter the Minister would come here and address the Senate on the matter. Suffice to say all that has not happened but the runaway inflation continues.
What makes matters worse is that there are now shops that do not take the local currency. If reports are to be believed, they say Government has given a go ahead for school fees to be paid in USD. My question Minister is; where are our people supposed to get the USD to transact with? Seeing that the shops now refuse local currency and only trade in USD and also seeing that school fees have to be paid in USD, where do our people access this USD from?
THE DEPUTY MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT: (HON. CHIDUWA): Thank you Madam President, I would also like to thank the Hon. Sen. for asking a pertinent question regarding prices. I would like to say that for our nation, pricing and inflation are issues which can be controlled if our industry is running and there is production and exporting instead of importing products. The obtaining situation is that as a nation, the greatest challenge we have is the escalation of prices. Why are prices rising every day? The first thing is, because we have a volatile exchange rate. If we look at the two exchange rates, the official exchange rate which comes from the auction system and the parallel market rate which happens in the black market, the parallel market rate happens when we look at the basic fundamentals being flouted. If we look at the situation from November to December 2018, as government, we resolved not to borrow from the RBZ. There was no recourse from the RBZ, which is a situation in the past that was contributing to the escalation of prices. We know that our nation is under sanctions and we decided to live within our means. We are running a balanced budget and when you look at our income and expenditure, there is not much difference from 2018. We have not exceeded 3% deficit but we have a budget deficit of 1.3% in line with the agreed targets. Looking at what we are getting as foreign currency, we have a current account surplus. These are basic fundamentals which determine the exchange rate but why is the exchange rate rising? This shows that there is economic speculation which is the major problem because there are people who believe that trading in foreign currency is the business that we should be seized with but as a nation we are supposed to produce goods and services and not parallel market activities. So, the biggest challenge is the parallel market.
So what have we done as government to control price escalation? I did mention that they rise because of imported inflation like what is happening in Russia and Ukraine. As Government, I am sure you heard a Presidential Policy Statement which says let us look at pricing for those who are developing roads, dams, airports and other projects. We noted that the challenge that we faced was the forward pricing where people charged an anticipated price surmised on when they would complete their projects factoring in the exchange rate for forward pricing and government has moved to manage money supply growth which is at zero percent. Currently, people may be saying they do not want the Zim-dollar but everyone is looking for it but it is not readily available because as Treasury and monetary authorities, we went and focused on money creation.
Everyone has the US dollar and wants to convert it to the Zim-dollar which is scarce. The rate on the parallel market has drastically gone down. Some are using 600 as the exchange rate. On Tuesday, the auction rate was 550 and on the parallel market it was 600. There is a small discrepancy between the rates but you find some using extreme rates. We will continue holding the money supply. We have created demand for the Zim-dollar, so I do not know where this is coming from that there are some people who are not having access to money. There are some shops who are not taking the US dollar because of its strength. It affects the growth of business and we believe that in the medium term we will unite on the stability which is prevailing.
You also mentioned that school fees should be paid in US dollars only but that is against government policy. It was pronounced that we are now using both the US dollar and the Zimbabwean dollar. Where we are charging in US dollars, all parties should allow payment in Zim- dollars using the existing auction rate. Where people are charging exclusively in US dollars, that becomes a crime which needs civil penalties. Hon. Senator, this is the current position.
The other issue which you might have wanted addressed is the stability in the rationalization of invoices which I mentioned. As government, we are paying all contractors. We know our contractual obligation and our accounting officers are going to ensure that rationalization is done where invoices were given using forward pricing. We will continue to honour our obligations and that is the position we have as government. Thank you Hon. Senator.
*HON. SEN. ENG. MUDZURI: Hon. Minister, you responded to the question but you did not address the key issue in the question that in some shops you are told that you cannot buy goods if you do not have the US dollar. The question is; what happens and how are you going to address that because that person is paid in Zim-dollars? I saw that happening in rural areas and wondered how the elderly are surviving and how they get the US dollars to buy commodities in shops. How are you going to address that?
THE HON DEPUTY PRESIDENT OF SENATE: I thought the Minister said it is illegal and government can institute civil penalties.
*HON. SEN. ENG. MUDZURI: The Minister said that but we want an answer from Government on how they are going to do it because it is happening now. It is happening in schools and this is a question which was raised and needs to be responded to.
*HON. CHIDUWA: I would like to thank Hon. Sen. Mudzuri for the question that there are people being denied commodities because they do not have USD. I believe this is a problem of coverage and we are not represented in all areas. The Financial Intelligence Unit under the RBZ works with the law enforcement agents. We have a Ministry hotline which is published in newspapers where cases similar to this are reported. When we receive such information or reports, we update our records. As of now, we have penalised some companies for amounts ranging from US$50 000-60 000.00 – these were charging in USD exclusively. We are fining perpetrators and it is a matter of time, we are going to allow the hand of the law to stretch far and wide so that we correct this anomaly so that there is market discipline. I thank you.
Source: The Insider
