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Mthuli sets aside US$150 million for currency reform losses

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By Alois Vinga


FINANCE Minister, Mthuli Ncube has set aside a total US$150 million which will go towards compensation to vulnerable households and pensioners who lost value during government’s currency reform processes initiated last year.

Presenting the 2021 proposed national budget, Ncube acknowledged the losses suffered by citizens during reform processes triggered by his Transitional Stabilisation Programme.

Government, through the Central Bank, introduced market determined exchange rates through the Monetary Policy of (SI 33 of 2019) on 20 February 2019 entailing the transition from the exchange rate of US$1: RTGS$1, initially to US$1: RTGS$2.5 and thereafter fluctuated as determined by the interbank market activities.

This transition resulted in currency losses to small and vulnerable households with deposits less than US$1 000 in the bank.

Said minister Ncube, “Therefore, the government has made a decision to compensate the small and vulnerable depositors who had US$1000 and below for the exchange rate movement loss with resources equivalent to US$75 million,” he said.

The resources will be administered by the Deposit Protection Corporation (DPC).

“Similarly, the above development affected pensioners, with the transition causing losses for pensioners as at 20 February 2019. They too will be compensated with resources equivalent to US$75 million, which will be co-managed by Government and the Insurance Pension Commission (IPEC).”

He however said this arrangement will exclude recommended compensation under the Smith Report.

The currency reform transition also resulted in massive devaluation of workers’ earnings curtailing purchasing power and in the long term choked local demand for goods and services.

Since the reform exercise, unions have pressed the government to allow the rating of salaries against the obtaining US dollar official exchange market rates.