Harare City forex accounts frozen

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The Sunday Mail

Richard Muponde

The Financial Intelligence Unit (FIU) has frozen the foreign currency accounts of Harare City Council (HCC) for charging prices exclusively in foreign currencies and using parallel market rates, in a crackdown on local authorities involved in illicit financial transactions.

This is part of a series of measures that the FIU will continue to implement to maintain the current market stability, which has seen the official exchange rate move closer to convergence with the parallel market rate.

HCC and other municipalities have been investigated for breaking the law by setting prices in foreign currencies without giving ratepayers the option to pay in local currency for certain services.

In an interview, the Director General of the FIU, Mr. Oliver Chiperesa, said that the net is closing on all non-compliant local authorities.

“We have frozen the US dollar accounts of Harare City Council. In terms of the law, they are supposed to allow the public to pay in either currency, but they have a habit of insisting on US dollar payments with no option to pay in Zimbabwean dollars for some services . We hired them, to bring them to order,” Mr. Chiperesa said.

He said the FIU wanted to send a clear message to public institutions that they should be at the forefront of compliance with the law.

“We will therefore target public entities, not only those that refuse to accept local currency for certain services, but also companies that charge using parallel market rates. No one has an excuse, especially public institutions,” he said.

Economists have forecast that the local currency will stabilize between US$1 and US$600, which will be the convergence rate of the parallel market and the official rate.

Reserve Bank of Zimbabwe (RBZ) monetary policy committee member Mr Persistence Gwanyanya said as the local currency nears stability, businesses will be forced to lower prices.

Mr Gwanyanya said the government will increase demand for the Zimbabwean dollar to achieve lasting stability.

“This is necessary to minimize the risk of dollarization as the local currency supply remains tight. Appetite for the Zimbabwean dollar by the government, which controls over 70% of the market, is increasing and businesses should, as soon as possible , realizing that the honeymoon is over and revising their prices lower, it looks like the local currency will stabilize at US$1:600,” Gwanyanya said.

He said the honeymoon is over for those who profited from speculative activity and currency manipulation.

“The government is determined to support the local currency and make it a preferred currency. There should be no going back on the current stability measures because stability is good for everyone. The honeymoon is over and businesses need to get back to basics where productivity, not speculation or arbitrage, is key,” he added.

Harare-based economist Dr Kingstone Kanyile said stability would be maintained if the government continued to control the money supply.

“As long as we have demand without much supply, we will stabilize at $600-700 per US$1. The government’s efforts to stabilize exchange rates are much appreciated. Naturally, parallel market rates are falling when there are fewer dollars in local currency. The government has turned off the tap for the time being.

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