Latest data from the Deposit Protection Corporation (DPC) has shown that Treasury failed to meet its promise to avail funds worth US$75 million to compensate depositors who lost value during the currency change in 2019.
In the 2021 national budget statement, Finance minister Mthuli Ncube said through the central bank, a market determined exchange rate was introduced in Statutory Instrument 33 of 2019, causing a loss of value on deposits.
This was because the law entailed moving from the exchange rate of US$1: ZW$1, initially, to US$1: ZW$2,50 and thereafter to be determined by the interbank market. Resultantly, there were currency losses to small and vulnerable households.
Thus, the finance minister promised to avail US$75 million to compensate small and vulnerable depositors who had US$1 000 and below in their account at the time of the change.
However, the DPC’s 2022 annual report released on Monday showed that this commitment had not been met.
“In the 2021 national budget statement presented in November 2020, the minister of Finance and Economic Development announced that the government would compensate small and vulnerable depositors who had balances of US$1 000 and below for the loss of value incurred during the exchange rate movement from US$1:1 to US$1:2,50 as at 20 February 2019, with resources equivalent to US$75 million,” the DPC said.
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“Government, through Kuvimba Mining House, availed US$400 000 to the DPC for the compensation of small depositors for the loss of value incurred due to the exchange rate movement.
“In view of the resources that were available, the corporation allocated the initial tranche of US$400 000 to eligible depositors in deposit taking microfinance institutions (DTMFI).”
The corporation said it closed the window for submission of claims for loss of value compensation to depositors of DTMFIs on July 10, 2022, as per the Finance ministry guidance.
“As at 20 July 2022, all eligible depositors who submitted their claims were duly compensated by their respective DTMFIs. On aggregate, the corporation had processed 917 claims for DTMFI depositors with a cumulative value of US$83 359 leaving an unclaimed balance of about US$316 641,” the DPC said.
Accordingly, the corporation proceeded to avail US$316 641 to POSB under Phase 2 of the loss of value compensation exercise.
“The loss of value exercise for POSB was well received. About US$25 million is required to compensate POSB depositors in full,” it said.
“As at 31 December 2022, POSB had received 49 318 claims worth US$5,8 million as depicted hereunder. It is self-evident that additional funding is required to maintain the compensation for the loss of value momentum at POSB as well as the subsequent phases.”
In its recently released 2023 Investment Climate Statement on Zimbabwe, the United States government noted that policy inconsistency was a hindrance to implementing investor friendly policies.
The DPC is a scheme established by the government to protect depositors against the loss of their insured deposits placed with member institutions licenced to operate banking or finance business.