THE return of the Zimbabwean dollar has become a topical issue among locals and abroad, as people seek to gain understanding of its implications on the economy.
In particular, the public is concerned about the impact of the policy shift on their earnings, spending power and general livelihood.
This is understandable given that the country has been using the US dollar-dominated multi-currency system for the past 10 years. Below are some of the key questions asked and responses from Treasury.
Q1. Please explain to me what the Statutory Instrument entails
The Government of Zimbabwe through the Minister of Finance and Economic Development issued Statutory Instrument (SI) 142 of 2019, which abolished the multicurrency system and designated the Zimbabwe dollar as the sole currency for legal tender purposes in the country with effect from 24th June 2019.
The SI 142 of 2019 specifically entails the following:
i. Introduction of the Zimbabwe dollar;
ii. Abolition of the multicurrency system;
iii. Designated bond notes and coins as well as electronic currency as Zimbabwe dollar;
iv. Maintenance of Domestic Nostro Foreign currency for effecting foreign payments; and
v. Maintenance of import duty or Value Added Tax for luxuries in foreign currency.
The Policy measures entail that economic agents can hold foreign currency in Nostro Accounts and Free Funds as before but will need to change the foreign currency in local banks and bureaux de change into local currency for domestic transactions.
Individuals and corporates can, however, make foreign payments using funds in their FCAs.
N.B: One can withdraw up to US$1 000 daily but to use it locally you have to change it/liquidate at a commercial bank or bureaux at the prevailing interbank rate.
Q2. In what currency will prices be quoted in?
Since the Zimbabwe dollar is now the sole legal tender, according to SI142/19 and RU102/2019,all prices of goods and services sold within Zimbabwe will be quoted in that currency (except for Airline tickets, [need to confirm with Exchange Control if it is the only exception])).
Q3. Will remittances (money sent by relatives and friends outside Zimbabwe) be receivable in Zimbabwe dollars, if sent through Western Union or any other Money Transfer Agencies?
You can still receive your money sent as foreign exchange through Western Union, Moneygram and all the registered Money Transfer Agencies.
The recipients have three options: first, they can receive it in cash. Second, they can sell the cash to a Bureau de Change or to banks on a willing buyer willing seller basis.
Third, they can deposit the cash into their individual Nostro FCA (Domestic) accounts.
Q4. I receive remittances through the FCA, can I withdraw them in foreign exchange?
There are two types of Nostro accounts for individuals.
There is what is called Nostro FCA and what is called Individual Nostro FCA. Nostro FCA is the one where you have to withdraw the money as Zimbabwe dollars.
But with Individual Nostro FCA, you can withdraw your money as foreign exchange, at the discretion of the bank, through the “Know Your Customer” (KYC) principle.
Q5. Am I allowed to buy foreign exchange to use in a foreign country and how many times can one apply within a given period?
Yes, you can buy forex on the interbank market to use in a foreign country, after providing your bank or Bureau de Change with required travel documentation. The limit of export of cash in person or baggage remains US$2 000 per exit.[Need to check with Exchange Control on documents required and frequency of applications]
Q6. Can I send and receive money locally between FCA accounts?
Not anymore. Actually you can only send and receive money between 2 FCAs (if the transaction was done before 24th June, 2019) up until the end of this month.
Thereafter, it will not be possible. “ . . . existing Nostro FCA (Domestic) shall be allowed to receive deposits up to 30 June 2019 to enable account holders to deposit their cash holdings realised from trade undertaken before 24 June 2019.”
Q7. How much can I withdraw from my USD account at the bank per day?
The current withdrawal limit for individuals remains at US$1 000 per day.
Individuals are still able to withdraw their cash from their individual accounts and banks are, in line with international best practice, expected to apply the KYC and AML/CFT principles.
“Further to our Directive, the Reserve Bank wishes to advise that contrary to certain information being circulated on social media, cash withdrawals by individuals are still permissible and the policy position hasn’t changed”.
Q8. Why has the Reserve Bank increased interest rates to 50% p.a?
Even though interest rates will remain negative in real terms, the increase in the overnight interest rates will likely make monetary assets more attractive relative to alternative assets in the near term.
The attendant increase in borrowing rates will also discourage borrowing for speculative purposes.
Q9. Why have the Authorities made the Zimbabwean dollar the sole legal tender?
This will likely reduce pressure on foreign currency demand, hence reducing the uptick in domestic prices.
Q10. How will visitors who do not hold bank accounts locally or EcoCash transact as they may not get cash upon converting their foreign exchange?
Visitors are expected to make use of bureaux de change and commercial banks to convert their foreign exchange into local currency before making domestic transactions.