Zimbabwe Scraps Statutory Instrument 81A

Leveling the Playing Field

By Shingirai Vambe

In a significant move towards economic liberalization, the Zimbabwean Minister of Finance, Economic Development and Investment Promotion, Mthuli Ncube, has repealed Statutory Instrument 81A of 2024. This statutory instrument had imposed restrictive foreign exchange pricing requirements on formal businesses, compelling them to use the official exchange rate. However, this had put them at a disadvantage relative to informal operators, who were not bound by the same rules.

The repeal of this instrument is a welcome step, as it aims to level the playing field for formal businesses. By giving them more flexibility in managing their foreign exchange transactions, the government hopes to increase their competitiveness and promote economic growth. This move demonstrates Zimbabwe’s commitment to economic reform, particularly in the context of the Structured Dialogue on Arrears Clearance and Debt Resolution.

The Structured Dialogue is a critical pathway for Zimbabwe to move towards comprehensive debt restructuring and access to international financing. The repeal of Statutory Instrument 81A of 2024 is a significant step in this direction, as it shows the government’s willingness to implement policies that promote economic stability and growth.

The implications of this move are far-reaching. By promoting a more favorable business environment, the government hopes to increase investor confidence and attract more investment into the country. This, in turn, could lead to increased economic growth and development, ultimately improving the lives of Zimbabweans.

This demonstrates the government’s commitment to economic reform and its willingness to implement policies that promote economic growth and stability, says European Union Ambassador to Zimbabwe, Jobst von Kirchmann.

Zimbabwe’s economy has been facing significant challenges due to the government’s control over foreign exchange rates. The discrepancy between the official rate and the rate available in the informal market has led to a collapse of formal businesses, including supermarkets. These businesses are struggling to source products using foreign currency, which is scarce at the official rate.

As a result, citizens are being forced to trade in their desired ways, often informally, to access the foreign currency they need. This has led to a situation where the government is struggling to maintain control over the economy. The government’s inability to effectively manage the foreign exchange market has left it on the back foot, with citizens finding ways to circumvent the system.

The consequences of this situation are far-reaching. Economic instability is rampant, with formal businesses struggling to operate and citizens forced to rely on informal markets. The government’s loss of revenue due to informal transactions is also a significant concern. Furthermore, the government’s control over foreign exchange rates may deter investors, who may view the country as having a high-risk economy.

In this environment, it is clear that the government’s approach to foreign exchange rate management is not working. A more liberalized approach to the foreign exchange market could help to address the discrepancy between official and informal rates. Increasing the availability of foreign currency, supporting formal businesses, and exploring ways to increase exports or foreign investment could also help to stabilize the economy.