RBZ spells condition to unfreeze council forex accounts

23 Sep, 2022 - 00:09 0 Views
RBZ spells condition to unfreeze council forex accounts Mayor Mafume


Peter Tanyanyiwa Suburban Reporter

THE Reserve Bank of Zimbabwe (RBZ) has ordered the City of Harare (CoH) to drop charging certain services exclusively in foreign currency to have its foreign currency accounts unfrozen. 

RBZ’s Financial Intelligence Unit (FIU) recently froze council’s foreign currency accounts after the municipality had announced that some of its services will now paid for exclusively in United States dollars from September 1, 2022.

The FIU said it had frozen Harare’s foreign currency accounts as part of a crackdown on local authorities involved in illicit financial transactions. 

The central bank said the move was necessary to control the parallel market rates, which had previously been spiralling out of control.  

Harare recently announced the decision to charge fees for building plan approvals, inspections and trenching among other services exclusively in US dollars. The fees ranged from US$50 to about US$5 700.

Council argued that it needed the foreign currency to pay for water treatment chemicals and fuel bills which are charged in foreign currency.

In an interview on Wednesday, Harare Mayor Councillor Jacob Mafume confirmed that the municipality had engaged the RBZ over its frozen foreign currency accounts and had been given a condition to have the accounts unfrozen.

“As CoH we have since approached the RBZ in an effort to engage them on the council frozen forex accounts and they gave us a condition for them to unfreeze them. The condition being that we stop our selected charging in US dollars and allow anyone and everyone to pay in RTGS if they prefer to do so,” he said.

Cllr Mafume denied allegations that the city was exclusively charging foreign currency to all ratepayers. He said that the exclusive US dollar charges were for selected ratepayers and service providers who also charge or get their money in US dollars. The mayor emphasised that council needed part of their revenue in US dollars because it was the currency they are being charged by suppliers of water treatment chemicals and fuel. 

“We were not charging ordinary residents in US dollars. Residents have always and will always pay their rates in any currency they want including the RTGS. However, we had selected institutions, which include embassies who receive forex exclusively whom we had asked to also pay us in that same currency. Some of these selected clients themselves had asked us to charge them in foreign currency so their charges won’t have to change each and every other month which seemed reasonable enough as we also needed the US dollars,” said Cllr Mafume.

He said with the condition set by the central bank, they will have to plead with residents and embassies to help them and pay in foreign currency voluntarily. 

“We are complying with the RBZ directive. However, we will have to talk to residents and different institutions which have access to US dollars so that we convince them to help us willingly so that we can finance service delivery. Everyone can pay their rates using any form of payment method at their disposal,” said Cllr Mafume.

When it froze the council accounts, the FIU also accused the municipality of using parallel market rates when billing residents who pay in local currency.

The move was a part of a raft of measures the FIU said it would continue to implement to maintain prevailing market stability that has seen the official exchange rate edging closer to converging with the parallel market rate.

Harare and other municipalities had been under investigation for going against the law by pegging prices in foreign currency without giving ratepayers the option of paying in local currency for some services.

FIU director-general Mr Oliver Chiperesa said the net was closing in on all non-compliant local authorities.

“In terms of the law, they are expected to allow the public to pay in either currencies, but they are having a practice where they are insisting on US dollar payments without the option of paying in Zimbabwe dollars for some services. We have been engaging them, to bring them to order,” Mr Chiperesa said.

He said the FIU wants to send a clear message to public institutions that they should be at the forefront of following the law.

“So we are going to be targeting public entities, not only those refusing to accept the local currency for certain services, but also businesses that are charging using parallel market rates. There’s no excuse for anyone, especially public institutions,” he said.

Economists have projected that the local currency will stabilise at US$1 to $600, which will be the convergence rate for the parallel market and the official rate.

Member of the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee Mr Persistence Gwanyanya said as the local currency moves towards stability, businesses will be forced to bring down prices.

Mr Gwanyanya said the Government will increase demand for the Zimbabwe dollar to achieve durable stability.

“This is necessary to minimise the risk of dollarisation as the local currency supply remains tight. The appetite for the Zimbabwe dollar by the Government, which commands more than 70 percent of the market, increases and business should, sooner rather than later, realise that the honeymoon is over and revise down their prices. It seems the local currency will stabilise at US$1: $600,” Mr Gwanyanya said.

He said the honeymoon is over for those who have been riding on speculative activities and currency manipulation.

“Government is determined to support the local currency and make it a currency of preference. There should be no going back on the current stability measures as stability is good for everyone. The honeymoon is over and business needs to go back to basics where productivity, not speculation or arbitrage, is key,” he added.

Harare-based economist Dr Kingstone Kanyile said stability will be maintained if the Government continues to keep a tight leash on money supply.

“As long as we have demand coming through without much supply, we will stabilise at $600-$700 per US$1. Efforts by the Government to stabilise the exchange rates are most appreciated. Naturally, parallel market rates fall when there are less dollars in terms of local currency. Government has closed the tap for now.”

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