The Zimbabwe Stock Exchange (ZSE) is set to remain under pressure as the government tightens its monetary policy to curb inflation. The treasury will now fund the Zimbabwe dollar component of the 25% foreign currency surrendered by exporters in an effort to avoid a creation of an additional money supply. Research firm IH Securities believes that the ZSE is a reflection of money supply dynamics due to non-traditional market players. They see buying opportunities in most counters despite big caps like Innscor, National Foods, Axia and Simbisa migrating to the foreign currency-denominated Victoria Falls Stock Exchange (VFEX). IH Securities also highlighted the need to create demand for the local currency through initiatives such as allowing all customs duty to be payable in Zimbabwe dollars. In addition to this, Treasury has halved the intermediate money transfer tax (IMTT) for foreign currency transactions to 1% and reduced the point-of-sale IMTT tax in foreign currency to 1% to encourage banking of foreign currency. The reduction of the USD IMTT tax will also encourage a return of USD deposits into the banking sector, potentially resulting in some uptick in liquidity.
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