President Emmerson Mnangagwa on Saturday, 7 May, announced new measures to encourage the use of the Zimbabwe dollar while at the same time discouraging the use of the US dollar in domestic transactions.
Addressing journalists while flanked by Finance and Economic Development Minister Mthuli Ncube and Reserve Bank of Zimbabwe (RBZ) governor John Mangudya at State House in Harare on Saturday night, Mnangagwa said lending by banks to both Government and the private sector has been temporarily suspended. He said:
In order to minimise the creation of broad money that is prone to abuse for purposes of manipulating the exchange rate for financial gains, and to allow current investigations, lending by banks to both the Government and the private sector is hereby suspended with immediate effect, until further notice.
The security agents of the Government and the Financial Intelligence Unit shall, with immediate effect, enhance their roles to effectively monitor financial transactions in order to address the delinquent arbitrage behaviour in the economy.
Civil penalties shall be substantially reviewed upwards to ensure that such behaviour is discouraged.
Appropriate legal changes shall also be instituted to elevate some of the financial crimes to become criminal offences, which automatically attract jail sentences.
Mnangagwa also directed the RBZ to settle all foreign currency auction system allotments within 14 days and to only auction off the funds it has.
He also announced that local currency transfers will continue to attract a 2 per cent Intermediate Money Transfer Tax (IMTT) tax, while foreign currency transfers will be levied at 4 per cent. Mnangagwa said:
All domestic foreign currency transfers to attract the Intermediate Money Transfer Tax (IMTT) of 4 per cent.
There is a preference to withdraw foreign currency for transaction purposes, thereby undermining IMTT collections, given that cash withdrawals are not liable to IMTT.
In order to discourage the withdrawal of cash which is traded on the parallel market, the cash withdrawal levy for amounts above US$1 000 will with immediate effect be reviewed from the current 5 cents per transaction to 2 per cent.
Mnangagwa further announced that banks can now purchase more forex under the willing-buyer, willing-seller system.
Currently, banks are limited to purchasing US$1 000 per day per individual. He said:
With immediate effect, the amount that can be traded under this arrangement has been increased to a maximum of US$5 000 per day with a limit of US$10 000 per week per individual.
Mnangagwa added that the transport sector will soon be opened to private players to provide public transport alongside the failing Zimbabwe United Passenger Company (ZUPCO).