It has always been the norm in Zimbabwe that import duty on vehicle imports is paid in foreign currency. That has changed with the government introducing a new policy. From now on, Zimbabweans can now pay 50 percent of their vehicle import duty in Zimbabwean dollars. This was communicated through a government gazette on Friday, the 15th of April 2022. The payable amount in Zimbabwean dollars will be pegged using the prevailing official interbank rate. Interestingly, government departments will still be an exception as they will pay the full import duty amount in Zimbabwean dollars like before.
What Is The Rationale Behind This New Regulation?
The finance ministry is bent on promoting the use of the Zimbabwean dollar. Thus they targeted vehicle imports knowing that it is an active domain. People will most definitely scramble to take advantage of that Zimbabwe dollar option. I find it strange though; government insists on the efficacy of the Zimbabwean dollar. So if it is a big deal as they suggest, why not allow everyone to pay the whole vehicle import duty amount in Zimbabwean dollars? You then get to see the contradictions coming to the fore.
Anyways, this new import duty policy comes to buttress some other measures already in place. For example, those into mining can now pay 50 percent of their royalties in Zimbabwean dollars. Those into exports can now have 40 percent of their export proceeds taxed in Zimbabwean dollars. Mining and exports are again active domains where the government knows there is a significant activity. By combining all these efforts it is apparent they want the Zimbabwean dollar to be widely used.
Is This What Zimbabwe Needs?
The measures being instituted do not address the root of the problem. It is no secret that the Zimbabwean dollar is weak – the increasing exchange rates are testament to that. The interbank rate is far-removed from the parallel market rate. That disconnects signals and also perpetuates price distortions. The measures they are putting in place are just froth with no substance.
A free-market system is what is needed not an operating environment where things are dictated. What Zimbabwe needs is an increase in production capacity. For as long as we still import more than we export, we are still far off the target. Increased production will correct most of the distortions running rampage in the economy. Any measure or policy devoid of efforts to increase local production is not the answer.
For as long as this is a multicurrency regime, it is a pipe dream to expect the Zimbabwean dollar to become stronger. The fundamentals necessary for the local currency to edge stronger are not being satisfied. What Zimbabwe needs is a single currency. Unfortunately, we cannot settle for the Zimbabwean dollar as a single currency right now. The negative effects of that move will be catastrophic. After all, the Zimbabwean dollar is still largely questionable as an actual currency.
One thing is for sure though, the government remains adamant that the Zimbabwean dollar should and will work. For the most part, I think it serves some people high up in government. They can cheaply access foreign currency and can cheaply access loans or funds. The existence of the Zimbabwean dollar serves them well but sadly at the expense of ordinary citizens. Let me hear your thoughts on all of this in the comments below. Is the 50 percent vehicle import duty payment in Zimbabwean dollars a good move? What are your thoughts on the overall currency system in Zimbabwe? What do you think is the best way forward and why?