Govt pursues forex abusers

13 Jun, 2021 - 00:06 0 Views
Govt pursues forex abusers

The Sunday Mail

Business Reporter

Government has started going after companies that are violating the recently promulgated Statutory Instrument (SI) 127, which is meant to protect consumers by ensuring they are not charged prices aligned to the black market exchange rate, especially by companies who would have benefited from the foreign currency auction.

SI 127 was gazetted on May 28 to address the gaps identified in the Bank Use Promotion Act (Chapter 24:24) and the Exchange Control Act (Chapter 22:05).

The new law — also known as the Presidential Powers (Temporary Measures) (Financial Laws Amendment) Regulations, 2021 — introduces administrative or civil penalties on delinquent individuals and corporate entities.

It also tries to minimise arbitrage opportunities in the market and abuse of the auction system, including providing a level playing field for business.

Finance and Economic Development Deputy Minister Clemence Chiduwa told the National Assembly on Wednesday that officers were sent out into the market and came back “with a long list of corporates that have abused SI 127”.

“As of 2 June, we had started issuing tickets . . . as Government, we should make sure that we are on the ground and enforce SI 127,” he said.

The price increases that followed the new law, he added, were just “transitory”, as consumer disposable incomes could not sustain high prices.

“The other issue which is being raised to say the SI 127 is going to result in rampant increases in prices both in Zimdollar and foreign currency, I think this is just a transitory issue.

“I know this is going to give a strain again on the demand for forex but what I can assure you is that in the medium term, there is going to be sanity because of lack of effective demand.”

He said while Government will allow businesses to come up with their own pricing models, a key factor was effective demand.

“You can increase prices the way you want but what is critical is effective demand. When you have increased your prices, are people going to buy?

“You can only buy where there is no choice, but look at how the Zimbabwe economy is dichotomised between the informal and formal sector.”

Government also ruled out price controls or subsidies.

Deputy Minister Chiduwa added:

“Price controls are not going to assist us as a country, they will take us back but as I have mentioned, there is the issue of effective demand and then the issue of import parity . . .

“But to have blanket subsidies as a result of the short-term impact of SI 127, this is out. What we will do as Government is to ensure that we are going to enforce SI 127 in terms of compliance.”

Government will also do anything in its power to narrow the premium between the black market exchange rate and the official rate.

“Obviously, in terms of policy, for us, what we would want is a situation where there is total convergence between the black market rate and the auction rate.

“However, in terms of the reality that is on the ground at the moment, what we can only do is to come up with policies that are going to narrow the gap between the black market and the official market.”— www.ebusinessweekly.co.zw

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