On May 29th, 2023, Zimbabwe’s Minister of Finance and Economic Development, Professor Mthuli Ncube, issued a directive requiring all customs duty to be paid in local currency. This directive is part of additional measures introduced by the minister to stabilize the country’s macroeconomy and the rapidly depreciating local currency.
As per the directive, seen by 24newsONLINE , all government agencies and parastatals are required to collect their fees in local currency, and non-exporters will be required to pay ZESA in the local currency. While all customs duty will have to be paid in local currency, exceptions will be made for designated or luxury goods, and importers may choose to pay in foreign currency. Here are excerpts from the minister’s statement:
Promotion of use of the domestic currency:
i. All Government Agencies including Parastatals will substantially now collect their fees in local currency;
ii. Payments to ZESA by non-exporters will be made in the local currency; and
ii. All Customs Duty to be payable in local currency, with the exception of designated or luxury goods. and where the importer opts to pay in foreign currency.
The impact of this directive is a matter of debate among economists. Some believe that it will promote the use of the depreciating Zimbabwean dollar, thereby stabilizing the foreign currency exchange rate. However, others argue that the local industry remains unable to meet demand, necessitating the need for imports to augment its efforts.
With the government recently opening borders to allow the importation of some previously banned commodities, there will be an increased demand for foreign currency to import goods, as the local currency is not a legal tender beyond Zimbabwe’s borders.
Furthermore, while the directive may encourage the use of the local currency, it may also discourage foreign investment in the country. International businesses may be hesitant to invest in a country where they cannot easily repatriate their profits in a foreign currency. They are attracted to Zimbabwe due to the widespread use of the US dollar, which they have been siphoning off leading to a depletion of foreign exchange reserves. Whether the directive is good or bad may depend on one’s perspective.