The Confederation of Zimbabwe Industries (CZI) has expressed cautious approval of the measures announced by Finance Minister Mthuli Ncube aimed at bolstering the rapidly depreciating Zimbabwe dollar, which has led to soaring prices of essential goods.
The Zimbabwe dollar has been experiencing a rapid decline, with its value currently hovering around ZW$ 3,700 against the US dollar, inching closer to the ZW$ 4,000 threshold.
As a result, the prices of basic commodities have skyrocketed, exacerbating the financial strain on citizens who are grappling with significantly reduced incomes due to the devaluation of the local currency. Many workers have been forced to voice their incapacity to meet their financial obligations.
In response to the economic challenges, Minister Ncube unveiled a series of measures to address the situation. One key measure involves the Treasury assuming responsibility for funding the Zimbabwe dollar component of the 25% foreign currency surrendered by exporters. The objective is to prevent the creation of an additional money supply. The foreign currency collected will be allocated to servicing the foreign currency loans held by the Reserve Bank of Zimbabwe.
Furthermore, Minister Ncube introduced a 1% tax on all foreign payments and maintained the United States dollar cash withdrawal at 2%. The Intermediated Money Transfer Tax (IMMT) for local interbank foreign transactions and point of sale IMMT in foreign currency has been reduced to 1%. Additionally, all excise duties on fuel must be paid in hard currency.
Among other measures, the Finance Ministry has implemented a cap of US$5 million for the weekly foreign currency auction, with winning bids required to be paid within 24 hours. Manufacturers selling goods like cement, milk, and soft drinks for export will be subject to value-added tax. Starting from June 1, 2023, the Treasury will assume all foreign currency debts from the central bank.
In response to these measures, CZI President Kurai Matsheza expressed cautious optimism, stating, “Most of the measures are welcomed if they are fully implemented.” The CZI believes that effective implementation of the proposed measures will be crucial in stabilizing the economy and alleviating the hardships faced by both consumers and businesses.
The CZI urges close monitoring of the implementation process and emphasizes the importance of taking decisive action to ensure the effectiveness of the measures in reviving the economy and restoring stability to the currency.