The Sunday Mail
THE Financial Intelligence Unit (FIU) has frozen Harare City Council (HCC)’s foreign currency accounts for charging prices exclusively in foreign currency and using parallel market rates, as part of a crackdown on local authorities involved in illicit financial transactions.
This is part of a raft of measures the FIU will continue to implement to maintain prevailing market stability that has seen the official exchange rate edging closer to converging with the parallel market rate.
HCC and other municipalities have 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.
In an interview, FIU director-general Mr Oliver Chiperesa said the net is closing in on all non-compliant local authorities.
“We have frozen the Harare City Council US dollar accounts. 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.”