By Alois Vinga
GOVERNMENT has legalised the use of foreign currency in settling local transactions and announced a raft of penalties applicable to exchange rate violators.
The new measures enshrined in Statutory Instrument (SI) 118A of 2022 clarified the tenure of foreign currency use in Zimbabwe for a period which will run up to 2025 as the government steps up efforts to debunk market speculation that US$ use could be ceased anytime since no legal backing had been crafted.
The measures were issued in terms of the in terms of section 2 of the Presidential Powers (Temporary Measures) Act.
In terms of the new measures, penalties have been introduced for exchange rate violators who are in the habit of charging for goods and services at local currency prices which are 10% above the obtaining official exchange rates.
“In the event of default, a fixed penalty of ZW$20 million or an amount equivalent to the value of the foreign currency charged for the goods or services in question,” reads the SI.
“This can also be in conjunction with a cumulative penalty over a period not exceeding 90 days of 5% of the outstanding amount for each day as from when the a ruling on such a matter was passed.”
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The administration also ordered foreign currency borrowers to pay back their loans in the exact currency they borrowed, implying that for instance, a client who receives a US$ denominated loan must pay back in the same currency.
“A natural or legal person who borrows foreign currency or receives credit denominated in any foreign currency from an authorised dealer or any other banking or financial institution must, notwithstanding the terms under which the loan or credit is advanced, repay the loan or credit in that foreign currency.”
The government also directed that failure to repay in the currency borrowed will attract a penalty which may combine a fixed penalty of the amount equivalent to the value of the foreign currency purported to be repaid in Zim$ and a cumulative penalty over a period not exceeding ninety days of 5% of the outstanding amount for each day from the date of default.
The move comes in response to concerns raised by several companies which lost huge amounts of foreign currency when the economy de-dolarised at a rate of 1:1.
As a result many companies and banks have been reluctant to extend long term credit for fear of such uncertainties and this also contributed to confidence deficits in the local currency.
