Harare (New Ziana) – Local miners will, with immediate effect, be allowed to pay up to 50 percent of their royalties in Zimbabwe dollars, as part of new policy measures meant to promote wider use of the local currency, the government announced on Friday.
Other measures announced by Finance and Economic Development Minister Professor Mthuli Ncube include allowing all duties and taxes due on the importation of designated motor vehicles to also be paid in Zimbabwe dollars up to a limit of 50 percent.
Ncube said while the foreign currency auction system had succeeded in sustaining the continuous use of the local currency, it had become imperative to expand the areas in which the Zimbabwe Dollar should be used in the economy while providing incentives for its use.
“All domestic taxes due from exporters on their export receipts are now payable in both foreign and local currency in direct proportion to the approved export retention levels. As an example, an exporter who receives foreign currency of say USD1000.00 at a 40 percent surrender ratio (60 percent retention) will pay taxes on the 40 percent in Zimbabwe dollars and the 60 percent in foreign currency,” he said in a statement.
“These measures reflect government’s commitment to promote the wider use of the Zimbabwe Dollar and to continuously strengthen the economy so as to build long-lasting macro-economic stability.”
Ncube said the measures were also aimed at taming the illegal foreign currency market, where the ZWL is trading at anything between ZW$190 and ZW$210 against the greenback.
On the official market, the Zimbabwe dollar is currently trading at ZW$116 to 1USD.
However, many businesses benchmark their prices against unofficial rates.
As such, Ncube said the new measures would also deal with the indexing of prices of goods and services at parallel market exchange rates.
“The continuation of these practices, which have been identified as significant contributors to price instability in the economy, are imposing downside risks to macro-economic stability, and the erosion of domestic and international competitiveness,” he said.
The International Monetary Fund has in the past advised the government to implement measures to increase local currency usage, through, for example, incentivising the holding of local currency over foreign currency and using the Zimbabwe Dollar in all of the government’s domestic transactions.
Welcoming the measures pertaining to the mining sector, Chamber of Mines chief executive officer Isaac Kwesu said this will help boost the sector’s performance.
“It is a positive development for miners given that currently their foreign exchange is heavily squeezed on a competing number of needs and demands emanating from external and local suppliers who were demanding payment in foreign currency or equivalent at parallel market rates which they can hardly afford,” he told New Ziana.
“It will give miners a reprieve and afford them additional foreign currency to meet their operational requirements for expansion and maintenance of production levels.”
Kwesu said miners would continue engaging the government for further policy support.
For example, he said, miners were appealing to the government for an upward review of foreign currency retention thresholds.
Currently, miners are required to liquidate 40 percent of their earnings into local currency and retain the rest.
The miners have been demanding retention levels of up to 80 percent.
“The portion that is liquidated is losing value on the basis that whilst the miners are paid by the Central Bank at the official exchange rate, their local suppliers are charging at black market rates so they are losing almost 20 percent of their revenue due to disparities between foreign exchange rates on the parallel market and on the official exchange rate. So we want that area to be addressed by monetary authorities to ensure that,” Kwesu said.
New Ziana
