How Zimbabwe’s new forex regulations may reverse its recovery programme

Conclusions and Recommendations

Whilst the government of Zimbabwe has done well in stabilizing the economy and the local currency over the last six to eight months, we are strongly of the view that SI127 of 2021, may undo the gains achieved over the period, which we fear will have serious repercussions on confidence in the local currency.

In our opinion, the Zimbabwean economy is still fragile after two consecutive droughts and a global pandemic, therefore the country needs more pro- growth economic policies aimed at generating foreign currency and stimulating economic activity.

The recent Incremental Exporter Incentives are a good example, of such pro-growth policies, which we encourage government to continue crafting and implementing.

Currency stability, in our opinion, is a function of the policy environment (i.e. Implementation of best practice economic policies on a consistent and predictable basis), and confidence.

Therefore, whilst government has done well in improving the policy environment (prior to SI 127 of 2021), only time can build the confidence in the local currency, and unfortunately there are no short-cuts, as confidence cannot be legislated or gazzetted.

We are also of the opinion, that government needs to seriously look into policies that incentivise the use of Zimbabwe dollars within the domestic economy, such as requiring all taxes and statutory payments to be done in local currency.

Such a policy will force exporters and all domestic foreign currency generators to liquidate foreign currency through the official channels in order to pay their taxes and other statutory obligations.

We also encourage the policy makers in government to consult widely within government and with the private sector before implementing any significant policy measures, as the success of any economic policy is always hinged on the buy-in of key economic stakeholders.

We therefore believe that SI127 of 2021 needs further refinement with the input of wider stakeholder consultations.- NewZwire/Own

See also:

Zimbabwe gazettes new regulations on the use of forex- here is how they affect you

The full regulations on the use of forex

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