In a recent directive, the Government of Zimbabwe ordered local councils, including the Harare City Council, to cease charging rates in foreign currency. This decision has sparked a debate among residents and stakeholders regarding the advantages and disadvantages of using the Zimbabwean dollar (ZWL) as the sole legal currency for local council charges.
Advantages of Government-forced ZWL Charges
Stability and Control:
By enforcing ZWL charges, the government aims to promote stability in the local currency and exercise control over the financial system. This can help curb inflation and mitigate the problems and risks associated with a dual-currency system. If councils start to demand payment in foreign currency it means less demand for the Zimbabwean dollar and that would ultimately result in the return to dollarisation and its associated problems such as tight liquidity.
Increased Revenue Collection:
For the government and local councils, requiring charges in ZWL may lead to improved revenue collection. When charges are denominated in a local currency, residents who primarily earn and hold ZWL are more likely to pay their dues promptly, enhancing the financial stability and operational capacity of the councils.
Economic Stimulus:
Focusing on the ZWL can stimulate the local economy by encouraging residents to spend their money within Zimbabwe. This can boost local businesses, generate employment opportunities, and contribute to overall economic growth.
Conclusion
The government's decision to enforce ZWL charges by local councils has many advantages. It aims to promote stability, control, and revenue collection. The exchange rate volatility and potential impact on service quality further complicate the situation. Striking a balance between the benefits and drawbacks of ZWL charges will require ongoing dialogue between the government, local councils, and residents to ensure the best outcome for all parties involved.
