Zimbabwe News and Internet Radio

Forex crisis causes mayhem

By Farayi Machamire and Jeffrey Muvundusi

Contraditions in the implementation of the controversial two percent tax have further fuelled an already volatile economic crisis, with companies responding by either closing shop or increasing commodity prices.

Professor Mthuli Ncube
Professor Mthuli Ncube

The inconsistencies follow austerity measures introduced by Finance minister Mthuli Ncube on October 15.

Ncube shook the market when he reviewed the Intermediated Money Transfer Tax from five cents per transaction to two cents per dollar, effective October 15.

He later toned down the tax a few days later following outrage from members of the public and business.

On Tuesday, Vice President Kembo Mohadi turned the tables, insisting government was yet to implement the two percent tax.

Ncube and President Emmerson Mnangagwa have since issued further statements, separately, to calm the situation.

But the varying statements have inadvertently confused the market with prices shooting through the roof; shortages emerging and parallel market rates hitting record territories.

To avoid diminution of value, retailers are now pegging their prizes in United States dollars as the Real Time Gross Settlement balances and bond notes devalue daily on the parallel market.

Political analyst Maxwell Saungweme told the Daily News yesterday that it was unfortunate that politics continued to supersede economic developments.

He said policy inconsistencies were typical of Zanu PF’s modus operandi that fuels speculation and inspire no confidence.

“This is not new. But in this case, it exacerbates a bad economic situation and betrays the disconnect between the political wing of Cabinet run from Zanu PF headquarters and the technocratic wing that really think going by the book will help. But as usual, little progress will be realised as political foolhardiness leads economic and policy logic in Zanu PF,” he said.

Analyst Pedzisai Ruhanya said Ncube was coming face to face with being a technocrat in a Zanu PF-led government.

He said: “Finance minister Mthuli Ncube and some of the technocrats who joined Zanu PF will realise shortly that corruption in Zanu PF is official government policy. The contradictions between the government and Zanu PF politburo on the fiscal and monetary measures are testimony!”

Legal watchdog, Veritas, said if financial institutions, banks and telecommunications companies had started implementing Ncube’s directive they would have been committing an illegality as the tax had not yet been gazetted.

“And they should bear in mind that if and when the minister makes appropriate regulations, any attempt to backdate the new rate of tax to 1st October is likely to face a stiff constitutional challenge.

Unlike the former Constitution, the present Constitution specifically commands ‘respect for vested rights’ [section 3(2)(k)]. [Note: ‘vested rights’ are those that already exist which cannot be impaired or taken away (as through retroactive legislation),” Veritas said.

Currency expert Steve Hanke who is a professor of Applied Economics and co-director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at the Johns Hopkins University, said it is impossible to tax an economy into prosperity.

“Zimbabwe’s new two percent tax on all money transfers reveals more than the tax. It’s a sign of a desperate government acting without thinking. This tax will only cause more private sector panic and further loss of confidence. The last thing Zim needs is more government involvement in the economy,” Hanke wrote on his twitter account. DailyNews