Industry wants SI 127 of 2021 suspended with fear of unintended consequences

The Confederation of Zimbabwe Industries (CZI) has recommended the government to immediately suspend Statutory Instrument 127 of 2021 (SI 127) and engage the business sector to come up with a way forward which doesn’t produce unintented consequences.

Under SI 127 of 2021, gazetted under Presidential Powers (Temporary Measures) (Financial Laws Amendment) Regulations, penalties are imposed for issuing of local currency receipt for a foreign currency purchase, pricing goods and services above the ruling exchange rate, pricing of goods and services only in foreign currency and using the money obtained from the auctions for other purposes than what the supporting invoices on the bid stated.

CZI President Henry Ruzvidzo told BusinessMail that while the intentions of the government regarding the instrument are to control inflation and bring stability in the foreign currency market, it produces negative unintended outcomes.

“It is our submission that the SI127 does the exact opposite of what the Ministry of Finance intends and indeed will reduce the amount of foreign currency in the official and formal channels, create USD inflation to achieve a perceived required return by business and reduce foreign currency revenues by government as currency will be driven underground,” CZI said.

Meanwhile, the informal sector has been affected with the introduction of this SI. A survey made by this publication has proved that vendors in Harare have been facing price hikes from the suppliers who are trying to adjust to the SI’s requirements.
Confidence is at the centre of all flat currencies and it is important to avoid policy misperceptions that may result from the well-intentioned SIs, CZI has said.

“It is important that we move to a single exchange rate at which the entire economy operates as the presence of multiple exchange rates in the economy encourages abitrage between the different markets. Further engagements are necessary to make this a reality.

“The call is not to scrap the SI but to suspend it pending discussions on aspects of the SI to establish the best way forward that does not produce negative unintended outcomes,” Ruzvidzo said.

On the contrary, the central bank says businesses have been given 2 weeks to regularise their systems so that they can comply with the SI on the receipting of goods & services in either foreign currency or local currency.

The bank believes that the SI is an essential means of enforcing compliance which is necessary for continued stability.

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