… as civil servants get US$ allowances
Zimbabwe’s apex bank, the Reserve Bank of Zimbabwe has moved to remove the peg on the interbank foreign exchange market, which could result in an effective floatation of the market.
The central bank governor John Mangudya said trading on the interbank market will return to an auction system.
Although the peg (25: 1) was introduced this March, the previous floatation of the interbank market was not effective with most foreign currency trading taking place on the illegal market.
“Further to the bank’s Press Statement of 8 June 2020 by which the Monetary Policy Committee advised that trading a formal market-based foreign exchange system will be put in place, the Bank wishes to advise the public that the Foreign Exchange Auction Trading System will be operational with effect from 23 June 2020,” said the RBZ governor in a statement today.
“The adoption of a Foreign Currency Auction System is expected to bring
transparency and efficiency in the trading of foreign currency in the economy.”
According to the RBZ, some of the salient features of the proposed foreign currency auction system include: bidders will submit their bids as individuals, firms and public enterprises through their Authorised Dealers (banks); bidders will only submit one bid per auction. In cases where the bidder submits two or more bids, all the bids shall be rejected; allotment of foreign currency to winning bids will be based on the Import Priority List, and the auction will only accept bids for a minimum amount of US$50,000 and a maximum of US$500,000 from each bidder per auction.
Bidding platform shall be the Reuters Foreign Currency Auction System (initially introduced early this year before the peg was set), which shall be linked to the Computerised Export Payments Exchange Control System (CEPECS) and Computerised Exchange Control Batch Application System (CEBAS).
The interbank foreign currency exchange market was introduced in February 2019.
Additionally, the monetary authorities have formalized a dual pricing system.
“In order to enhance the efficient pricing system in the economy, businesses will be required to display prices for goods and services and charge for all domestic transactions in both local and foreign currency at the ruling market rate,” said Dr Mangudya.
This comes as the Government also announced today that it will now pay a United States dollar-based monthly allowance to civil servants and pensioners, for at least a 3-month period.
Zimbabwe dollar earnings for both civil servants and pensioners have been reviewed upward by 50%.
According to Treasury, starting this month, civil servants will receive a US$75 Covid-19 allowance per month, while pensioners will get US$30.
“With immediate effect, all Civil Servants’ Salaries will be adjusted upwards by 50%. This increase also applies to all Government Pensions.
“In addition, all Civil Servants will be paid a flat, non-taxable, Covid-19 Allowance of US$75per month. Govemment Pensioners will be paid a flat, non-taxable, Covid-19 Allowance of US$30 per month,” said the Ministry of Finance and Economic Development.
“Government has taken due regard of the fact that addressing the wage challenges faced across the Civil Service, any salary reviews will need to be done within a holistic framework in order to ensure that such a review does not impose a negative shock in the market.
“This inteim arrangement is for period of 3 months, stating from June 2020.”