In a move that demonstrates the state is losing the struggle for dollarization, the administration has issued a circular permitting public institutions to partially pay salaries and benefits in US dollars.
The government in the past weeks introduced policies that taxpayers are compelled to settle tax obligations exclusively in local currency and that if the taxpayers do not have the local currency, they should approach the Reserve Bank of Zimbabwe as a way to avoid acceptance of the foreign currency. Other measures were also put in place to avoid the usage of foreign but rather local currency, although this had a negative effect on banks as they were struggling to secure the Zimbabwean dollars for funding in the wholesale auction. their bids. It can then be observed that the civil servant`s bill in January was about ZWL$ 100 billion and currently it is ZWL$ 500 billion a month, and due to the scarcity of the RTGS in the market, the government is failing to provide this local currency.
According to the Corporate Governance Unit, they have been receiving a lot of requests from public entities for approval for payment of salaries and allowances in both the official Zimbabwean Dollars and United States Dollars to cushion employees from the effects of inflation and exchange rate movements which have eroded the purchasing power of salaries and allowances and due to this quest they have been observing the increasing number of resignations of key personnel and loss of motivation and drop in staff morale amongst employees of public entities citing poor remuneration and conditions of service thus compromising efficient service delivery to citizens.“
Thus, the government has issued a circular allowing public entities to now pay salaries and allowances partly in United States dollars, which shows the state is losing the war of redollarisation. The government has been maintaining a hard stance against the payment of salaries in US dollars, saying no country can develop while using the currencies of other nations.
However, in circular 4/2023, dated 19 July 2023, Corporate Governance Unit secretary in the Office of the President and Cabinet (OPC) Allen Choruma, advised public entities that there is a policy shift with immediate effect that allows them to pay salaries and allowances amounting to and not exceeding 40% of combined gross and allowances and the 60% of the salary shall be paid in the official local currency, the ZWL. Part of the circular reads: “With effect from July 2023, all public entities as defined under section 2 of the Act (Public Entities Corporate Governance Act [Chapter 10:31], public entities will be allowed to make part payment of salaries and allowances in both ZWL and US. Public entities with no capacity to pay the 40% forex component were exempted from over-stretching themselves.
As of 25 July, the local currency gained ZWL$ 32.0677 against the United States dollar. A total of 16 bids were received and all bids were accepted amounting to US$ 14,471,600, although only 6 bids were allotted amounting to US$ 7,900,600. The amount on offer was US$ 20,000,000 whilst the highest rate received was ZWL$ 4,580 and the lowest bid rate was ZWL$ 4,480 giving us a weighted rate of ZWL$ 4,505.4232 as our prevailing interbank rate. Currently, the parallel market is trading at ZWL$ 6,200 against the US dollar.
