May 29, 2020

Government revenues to nosedive

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MARKET watchers have warned that treasury’s move to curtail mobile money and ZIPIT transactional limits and flexibility could result in a knock in government revenues, specifically the two percent Intermediated Money Transfer Tax (IMMT).

Analysts at research institution, Zimbollar, said government revenues would be adversely impacted by this ban.

“The two percent IMMT Tax revenues were largely on account of transactions on Mobile Money and ZIPIT platforms. With government expenditure growing, options to fund the budget become limited,” the analysts said.

The amount of money raised through the two percent Intermediated Money Transfer Tax (IMMT) is largely dependent on ZIPIT and mobile money transactions. Lower revenue inflows would shrink the government’s budgetary space.

According to official statistics, ZIPIT and mobile money constituted 23 percent of total transaction value in the national payments system last year.

Fiscal and monetary authorities in Zimbabwe have instituted a series of measures aimed at curbing illegal forex trading.

Just yesterday, the Reserve Bank of Zimbabwe (RBZ)’s Financial Intelligence Unit (FIU) directed all banks to review downwards ZIPIT transaction limits to ZWL$20 000 a day from ZWL$100 000 following abuse of the facility by illicit foreign currency dealers.

The Apex bank unit said it had directed Zimswitch, which operates the Zipit platform, to immediately implement the new position.

Meanwhile, ZimBollar said the caps on ZIPIT and restriction for mobile money platforms was also going to lead to enhanced use of the United States Dollar for domestic transactions coupled with a massive devaluation of the Zimbabwe dollar on account of its limited options due to the new limits.

“Whilst the ZWL has exhibited volatility and turbulence, it is important to highlight that economic agents accepted it as a currency albeit at a huge premium as demonstrated by the runaway alternative market exchange rate

“With Mobile Money and ZIPIT limits, two scenarios are likely to emerge: a) Increased ZWL Cash notes demand or b) a near 100 percent dollarised economy as retailers prefer to receive the forex directly than to get electronic ZWL which has limited use due to the limits,” ZimBollar said.

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