Investors get guarantee on multicurrency regime

Cairns chief operations officer Karen Jiri (centre) stresses a point during a panel discussion on Sustainable collaboration between farmers and food processors. Following proceedings are CZI chief executive officer Sekai Kuvarika (left) and Zimbabwe Mercantile Exchange general manager Garikayi Munema, (Picture: Nicholas Baikili)

The Government has assured investors and businesses operating in Zimbabwe that any policy decision to be adopted upon the expiry of the current term of the multi-currency regime, which runs through 2025, will protect the interests of key stakeholders.

This is considered critical to maintain the prevailing stability, growth, and inflation slowdown. A law is already in place guaranteeing the use of the multicurrency regime over the five-year period to the end of 2025.

In June 2022, the Government gazetted Statutory Instrument 118A of 2022, entrenching the multi-currency system into law and making both the US and Zimbabwe dollars legal tender for all local transactions for the five-year duration of the National Development Strategy 1 (NDS1), which ends in 2025.

The assurance will ensure business and market players steer away from short-term planning, which may result from perceived uncertainty over the use of a multicurrency regime after 2025.

Finance, Economic Development, and Investment Promotion Minister Prof Mthuli Ncube said the Government’s policy currently was that of a multi-currency regime, and the dominant currencies were the US and Zimbabwe dollars.

“Therefore, beyond December 31, 2025, we are mulling over it, and we will come back on that, but for now, we would like to assure businesses that whatever we do, we will make sure that we are able to protect business, transactions, and jobs.

“We will not do things in a manner that will jeopardise the growth that we have seen so far, and we would like that to continue, and people should continue to transact in that manner,” he said during a press briefing on the IMF/World Bank Spring meetings.

Minister Ncube said the economy has been stable and is showing signs of growth; hence, he would not make decisions that would derail current efforts.

He said next year, Zimbabwe is expecting a growth rate of 3.5 percent, while the International Monetary Fund (IMF) is projecting an economic growth rate of 3.6 percent, which is 0.1 percent higher than the Government has for 2024.

“We are taking into account the impact of El Nino, climate change issues around the energy sector, and the slowdown in some commodity minerals due to the global economic slowdown.

“But we still expect strong growth in manufacturing, infrastructure development, and tourism, while the slowdown will happen in the agricultural sector and in the mining sector,” he said.

The banking sector, pensions, and other economic players have often raised concern over the multicurrency issue, indicating that it is impacting their ability to commit to long-term investments.

Pension funds indicated that they are also failing to commit long-term funding as they are skeptical of what will happen to US dollar investments post-the-currency system five-year tenure. The funds are considered the most liquid industry that is critical in terms of resource mobilisation for companies and projects that require patient capital.

South Africa’s Nedbank Group chief executive, Mr Mike Brown, who was recently in Zimbabwe, said the economy is at the moment behaving in a shorter-term way until there is longer-term certainty, which will allow long-term commitments.

“Anybody operating in the market wants certainty on what is or is going to happen in terms of USD usage beyond 2025.

“In any economy that is largely 80 to 90 percent dollarised, to suddenly, at a certain point in time, change to a different currency is massively disruptive,” he said.

The multicurrency regulations gazetted by the Government empowered registered lenders, banks, or any financial institution that lends foreign currency to receive repayment of the loan or credit in that foreign currency.

In addition, the legislation is also aimed at supporting the use of the willing-buyer, willing-seller exchange rate market price discovery in the setting of prices on the local market.

According to figures from the Central Bank, about 94 percent of the total banking sector’s loan book and 88 percent of total deposits were denominated in foreign currency (USD) as of the end of June 2023.

Companies have also seen increased US dollar revenues.

Herald

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