ECONOMISTS say new measures to allow mining companies and other exporters to pay statutory taxes in Zimbabwe’s local currency will widen the gap in formal and informal exchange rates for the Zimbabwe dollar.
Zimbabwe Finance Minister Mthuli Ncube on Friday eased foreign currency tax payment requirements for mining companies, exporters and importers, as part of efforts to boost demand for the local unit of exchange. Previously, these statutory payments were wholly in foreign currency.
“These measures will widen formal and informal Zimdollar currency exchange rates as forex receipts to Zimbabwe Treasury and its agencies shrink, at a time when (the) imports bill is set to increase in sympathy to global inflation. In short, Prof must work on another plan,” said economist Alfred Mthimukulu. Zimbabwe’s economy has increasingly been dollarising, although businesses are still required to price their goods and services in both local and foreign currency using the official exchange rate.
On the streets of Harare, the Zimdollar traded at around 200 to the greenback, while on the official exchange market it is pegged at around 1:115 to the US dollar.
This has been problematic though for companies as they have to price their goods and services using the official exchange rate, while suppliers price their stock using the much more realistic unofficial exchange rate.
Additionally, aggregate demand for the Zimdollar has been plummeting, with some traders now refusing to accept the local unit for trade. Ncube is now seeking to shore up the local currency after introducing the new measures.
The new policies include allowing miners to pay mineral royalties in local currency, allowing vehicle importers to pay taxes in local currency and mandating other exporters to pay taxes in domestic currency for up to 50 percent of their bills. “All domestic taxes due from exporters on their export receipts are now payable in both foreign currency and local currency,” Ncube said.
“All mining royalties are now payable in Zimbabwe dollars up to a limit of 50 percent of royalties due.” Other “duties and taxes on the importation of designated motor vehicles” are now also “payable in Zimbabwe dollars, again up to a limit of 50 percent” of duties and taxes payable.
The new measures, Ncube said, are earmarked “to enhance the domestic use of the Zimbabwe dollar”, especially in light of inflation, which has remained elevated owing to the “indexation” and benchmarking “of prices and services at parallel market exchange rates”.
Zimbabwe industry and mining executives say they expect the government to ease up fiscal burdens on companies to enable them to raise capital to invest in expanding production. Industrialists and mining executives said the new measures needed to be supported by further production incentives and the removal of requirements for exporters to surrender part of their hard currency earnings.
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