SI 127 of 2021 was passed by the government on May 26, 2021 as an amendment to the country’s financial regulations, compelling all persons (natural or legal) to sell in foreign currency using the ruling exchange rate while penalties would be imposed for issuing of local currency receipt for a foreign currency purchase, pricing goods and services above the ruling exchange rate.
Since the promulgation of the new regulation, prices of goods and commodities have gone up, including those pegged in US dollar terms. In some instances, prices have increased by at least 45 percent.
But the finance minister who was addressing the Bulawayo press on Thursday argued indiscipline was to blame for price hikes as the SI was necessary to make sure there was compliance in the market system for foreign currency.
“The entire market system for foreign currency was advocated for by the private sector in the beginning of 2019. We liked what the business was saying and have an interest that it works well meaning the private sector and citizens comply, so whenever you see us issue an SI here and there, we are trying to fine tune the economy.”
Finance Minister, Professor Mthuli Ncube
“I know some people are concerned about the gaps between the auction rate and so-called parallel rate, the most important thing is stability. That is the first price, it’s not about closing that gap. But also who are you closing that gap with, if 90 percent of our transactions are through the auction, which is where they are. We are availing US$40 million a week. That’s quite a lot of dollars, then one is trying to converge with someone selling currency around the corner. But at the same time, you still want some kind of discipline, we want to make sure that you as the consumer are also protected and that business is also doing the right thing.”
Prof Ncube claimed SIs were meant to enforce compliance and dismissed allegations that the government had sinister motives.
“There’s nothing untoward. We just want to make things work better. We like a well functioning economy, I know I have heard some comments that, ‘Minister there are too many SI in this country, how many SIs have we introduced since’ and I was counting. When a government or policy makers are reforming an economy, a lot of SIs will be issued because you are reforming and fine tuning,” said the finance minister.”
“When you reform, you change to make sure there is compliance. You issue an SI and then you fine tune, you issue another one until you get to a point where there are fewer and fewer SIs. Have you noticed that in the last six months, there have been fewer and fewer SIs. Please notice, go back and count.”
The finance minister added that, “over time when an economy stabilises or when policy makers feel they are reaching the goal, there are always fewer SIs. SIs are about reforms and it’s what it is.”
Prof Ncube who throughout the press briefing continuously said was here to “listen, take notes to make use in policy deliberations,” failed to answer what the business’s reaction to the SI was as the sector was also complaining about the government’s arbitrary decision making.
When it was highlighted that prices of goods had increased, the finance minister responded, “This is clear indiscipline, absolutely!”
“Fuel most of the time is a US dollar product already. There is no exchange rate involved in most fuel you are buying. Fuel is an imported commodity, why would anyone increase fuel prices in US dollar terms. This is clear indiscipline,” he said.
Prof Ncube noted that the government would follow up on this.
“We are following this because we had this reported to us. As a government, we are following this to deal with this. It’s unacceptable. What has changed? Nothing, you just blame an SI, let’s be serious,” he said.
On the matter of some Bureau de Changes that were alleged to be diverting foreign currency to the parallel market, Prof Ncube said he would engage the Reserve Bank of Zimbabwe governor (John Mangudya).
“I will talk to the governor to look into this issue because our intention was for the bureau’s to take care of anyone who needs forex in small quantities and not allow them to go to streets. Again this is indiscipline, we need to deal with,” said the finance minister.