Zimbabwe’s Finance Minister Mthuli Ncube has announced an historic plan that will see the Government compensating individuals who had US$1 000 or less in the bank at the time of currency conversions.
Last June, the country effectively ended the multi-currency system, which had been in place since 2009.
Value loss has been concern for most Zimbabweans, but the Government has never admitted to worsening the country’s sovereign risk through some of its policy changes… until now.
And in an unprecedented move, Government will compensate the vulnerable for losses they incurred during the unavoidable currency reform process.
Presenting the 2021 National Budget in Parliament yesterday, Finance and Economic Development Minister Mthuli Ncube this afternoon said small and vulnerable households with deposits less than US$1 000 in the bank at conversion will be compensated.
“As part of a broader reform process under the Transitional Stabilisation Programme, Government through the Central Bank introduced market determined exchange rate through the Monetary Policy of (SI 33 of 2019) on 20 February 2019. This entail transition from exchange rate of US$1: RTGS$1, initially to US$1: RTGS$2,5 and thereafter determined by the interbank market activities.
“This transition resulted in currency losses to small and vulnerable households with deposits less than US$1 000 in the bank. The movement in the exchange rate from US$1: RTGS$1 to US$1: RTGS$2,5 resulted in a loss for such depositors,” he said.
“Therefore, Government has made a decision to compensate the small and vulnerable depositors who had US$1 000 and below, for the exchange rate movement loss from US$1: RTGS$1 to US$1: RTGS$2,5, with resources equivalent to US$75 million. The resources will be administered by the Deposit Protection Corporation (DPC).”
The Finance Minister said the proposed compensation framework will also extend to the country’s pensioners.
“Similarly, the above development affected pensioners, with the transition causing losses for pensioners as at 20 February 2019. They too will be compensated with resources equivalent to US$75 million, which will be co-managed by Government and the Insurance Pension Commission (IPEC). This arrangement excludes recommended compensation under the Smith Report,” he added.