Zimbabwe Government Unveils Measures to Stabilize the Economy
Stabilizing the Economy
In a recent announcement, the Zimbabwean Government has revealed a set of policy measures aimed at stabilizing the country’s economy. These measures come as part of the ongoing efforts to foster macroeconomic stability and address the depreciation of the local currency, as well as rising prices.
Led by the Ministry of Finance and Economic Development, Hon. Prof. Mthuli Ncube. The government is determined to restore trust and confidence in the economy while preserving the purchasing power of the Zimbabwean dollar.
Additional Measures to Curb Currency Depreciation and Price Increases
Under the National Development Strategy 1, the government has already implemented various fiscal and monetary measures to foster macroeconomic stability.
Furthermore, to strengthen these efforts, the government has introduced additional measures targeting the depreciation of the local currency and rising prices.
Retention on Domestic Foreign Currency Sales Increased to 100%
Additionally, in a move to support domestic businesses and enhance access to foreign currency, the government has raised the retention on domestic foreign currency sales to 100%. This means that businesses can now retain the entirety of their foreign currency earnings, potentially leading to an increase in US dollar deposits within the banking system.
By bolstering foreign currency availability, the government aims to stabilize the exchange rate and mitigate further currency depreciation.
Transparent Funding of External Loans by Treasury
Moreover, to ensure transparent financing of external liabilities, the government has decided to adopt all external loans through the Treasury. This move aligns with the National Budget and promotes accountability in managing external debts.
By centralizing the responsibility for external loans, the government aims to improve fiscal management and reduce the risk of accumulating unsustainable debt levels.
Removal of Importation Restrictions on Basic Goods
Also, in an effort to promote competition and alleviate price pressures, the government has lifted all restrictions on the importation of basic goods. This policy change encourages market competition, which can lead to lower prices for essential commodities.
By providing consumers with access to a wider range of affordable goods, the government aims to mitigate the impact of inflation and enhance affordability for the general population.
Encouraging the Use of Domestic Currency
To boost the demand for the local currency, the government has emphasized the promotion of domestic currency usage by government agencies. This measure includes the collection of fees in the local currency by all government agencies and parastatals.
Additionally, payments to the national power utility company, ZESA, will be required to be made in the local currency, except for exporters who can still use foreign currency. The government believes that increased domestic currency demand will contribute to stabilizing the local currency and reducing reliance on foreign currencies.
Key Supportive Measures and Immediate Implementation
Additionally, to the measures outlined above, the government has introduced supportive policies to reinforce economic stabilization efforts and address urgent concerns.
Treasury Funding of Zimbabwe Dollar Component from Exporters
To prevent the creation of additional money supply, the government has directed the Treasury to fund the Zimbabwe Dollar component of the 25% foreign currency surrendered by exporters.
This move aims to eliminate the need for banks to withhold foreign currency and ensures that the collected foreign currency can be utilized to service the foreign currency loans assumed from the Reserve Bank of Zimbabwe.
1% Tax on Foreign Payments and Maintenance of USD Cash Withdrawal Tax
To enhance revenue generation, the government has introduced a 1% tax on all foreign payments. This measure seeks to increase foreign currency inflows and provide additional resources to support economic stability measures.
Furthermore, the existing USD cash withdrawal tax will be maintained at 2%, contributing to the government’s revenue generation efforts.
Enhancing Gold Traceability and Fuel Payment in Foreign Currency
Lately, to align with international standards, the government plans to establish a system through Fidelity Gold Refinery
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