Treasury Scraps Duty on Essential Commodities Imports

Treasury Scraps Duty on Essential Commodities Imports
… transfers Govt loans from Central Bank to Treasury
Nevanji Munyaradzi Chiondegwa
All restrictions on the importation of basic commodities were lifted as the government sought to boost market supplies and granted 100 percent retention of domestic foreign currency earnings.
To tackle the resurgent price increases and stabilize the macro economy, the government is working on further fine-tuning the official foreign exchange auction system.
Additionally, Treasury will now be adopting all external loans to the Government, constantly reviewing domestic interest rates to promote wider local dollar usage and savings by the people.
In a statement yesterday, Finance and Economic Development Minister, Professor Mthuli Ncube, said the interventions have been necessitated by the resurgence of speculative macro-economic instability in which domestic inflation is driven primarily by the skewed preference for the use of the United States dollar as a savings currency.
The recent spate of price increases linked to wild parallel market rates has led to the erosion of people’s incomes.
“It is against this background and following wide consultations with the private sector and other stakeholders that Government now announces the following policy measures:
(i) In order to enhance the supply of basic goods to the public, all basic goods will no longer be subject to import licenses and will also come into the country free of import duties and taxes.
(ii) In order to promote the banking of domestic sales in foreign currency, the Reserve Bank of Zimbabwe will with effect from 15 May 2023, exempt all proceeds from domestic sales in foreign currency from the 15 percent surrender requirement.
(iii) All external loans to the Government will now be transferred from the Reserve Bank of Zimbabwe to Treasury. The Foreign Exchange Auction System will be further fine-tuned and will now auction a pre-announced envelope on a pure Dutch auction basis.
Citing the importance of interest rates as a key variable of focus and one of the main tools for monetary authorities to discourage speculative borrowing and reduce the velocity of the Zim-dollar, Prof Ncube said the Central Bank through its Monetary Policy Committee, will continue to review the domestic interest rate framework to allow domestic currency savings interest rates to be above the perceived rate of expected devaluation for holding ZWL balances, to be attractive to savers.
“In the short-term, Government needs to immediately cause short-term interest rates of tenors up to six months to rise sharply, with longer-term rates remaining low, to reflect future inflation expectations,” he said.
“This will squeeze out speculative demand for both ZWL and USD.”
Further, the Government will, from now on, entrench the promotion of the use of the domestic currency by Government agencies for their domestic transactions by ensuring that levies and fees charged by its affiliated agencies and service providers, are to be paid for in local currency.
Prof Ncube said the Treasury was pleased with the uptake of both the gold coins and gold-backed digital tokens by the market and assured the public of the confidence in both instruments, which remain fully backed by physical gold reserves.
“Government remains committed to maintaining macroeconomic stability and the elimination of harmful and destabilising arbitrage conditions that have pervaded the economy at the expense of the generality of citizens,” he said.
Meanwhile, Prof Ncube said the economy remains on the right path with positive strides being registered in line with the National Development Strategy (NDS1) blueprint.
“The Zimbabwean Economy remains on a firm growth path, with all key productive sectors registering positive growth. After registering about four percent growth in GDP for 2022, we anticipate that growth for 2023 will be significantly higher than the initial projection of 3,8 percent.