IN a desperate bid to halt the rapid weakening of the Zimbabwean dollar, the Reserve Bank Zimbabwe (RBZ)’s Financial Intelligence Unit (FIU) has, with immediate effect, imposed daily and monthly transaction limits on the ZIPIT payments platform for all bank clients, but economic analysts have warned of severe repercussions.
The new daily and monthly limits have been pegged at ZW$20 000 and ZW$100 000 respectively. Before this intervention, the daily limit was ZW$100 000.
Analysts said the new restrictions on ZIPIT and mobile money transactions could result in either higher demand for Zimbabwean dollar bank notes or near-total dollarisation of the economy.
“With mobile money and ZIPIT limits, two scenarios are likely to emerge: increased Zimdollar cash notes demand, or a near-100% dollarised economy as retailers prefer to receive the forex directly than get electronic Zimdollars which have limited use due to the limits,” said the ZimBollar Research Institute, a local economic think-tank, last night.
“Increased demand for Zimdollar cash notes will impact the already existing premium on cash notes, whilst near-100% dollarisation implies an accelerated depreciation of the Zimdollar as it becomes less and less preferable. Both scenarios imply an increase in the (exchange) rate.”
Economic commentators warned that government revenues could be adversely affected by the new restrictions on ZIPIT and mobile money transactions.
The amount of money raised through the 2% 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% of total transaction value in the national payments system last year.Last week, the central bank introduced new ZW$10 bank notes, saying it would improve money supply and circulation in the country.
However, the move was immediately followed by a spike in parallel market foreign exchange rates, with the US dollar trading as high as 1:75 to the Zimdollar.
An official in the RBZ’s FIU, Wonder Kapofu, in a letter to Cyril Nyatsanza, the CE of Zimswitch Technologies, which operates the payments platform, said the central bank has revised the transaction limits in a bid to curb the abuse of the electronic money transfer system.
Kapofu accused parallel market foreign currency dealers of riding on ZIPIT.
“The FIU has noted that existing ZIPIT transaction limits which have no monthly caps are being abused, primarily for illicit foreign currency transactions,” Kapofu said.
“The current limits of ZW$100 000 per day allow a customer (subject to any bank-specific limits) to move ZW$3 million per month, using a single account, and much more if he/she is multi-banked and/or uses third party accounts.
“The FIU has noted KYC (Know Your Clients) shortcomings in the ZIPIT system that make it difficult for banks, regulators and law enforcement agencies to speedily identify counter-parties to a transaction, or to identify multi-banked users,” Kapofu added.
He said in order to ameliorate the situation, the central bank had resolved to reduce the daily and monthly transactional limits.
“Until such a time when adequate safeguards are built into the ZIPIT system to minimise the money laundering risk, Zimswitch is directed to implement, with immediate effect, daily and monthly ZIPIT limits to ZW$20 000 and ZW$100 000, respectively,” Kapofu said.
He highlighted that the limits had been set using salary and income benchmarks of many Zimbabweans across the board.
“The limits have been arrived at cognisant of the reality that very few Zimbabweans earn more than $100 000 per day, and those who do have other payment options available for higher value transactions,” Kapofu said.
The central bank has in recent weeks frozen accounts belonging to agents of mobile money platform EcoCash and suspended the fungibility of Old Mutual, Seed Co and PPC as part of efforts to stem the rapid weakening of the Zimdollar.