The Sunday Mail
Senior Business Reporter
The Reserve Bank of Zimbabwe (RBZ) says the unrelenting demand for foreign currency on the interbank market could have been triggered by the low rate of 1:2,5 at which it started, resulting in many individuals and corporates stampeding to benefit.
This emerged last week during the 4th retailers and wholesalers’ indaba 2019 in Harare, organised by the Confederation of Zimbabwe Retailers (CZR).
RBZ Deputy Director for Economic Research Division Dr Nebson Mupunga, said despite the current pressure on foreign currency on the interbank market, the situation is expected to improve in the near future driven by exports, particularly from tobacco and minerals.
“As Reserve Bank, we see the foreign currency situation improving going forward because the introduction of the interbank market on a willing buyer-willing seller, we saw it as a way of efficiently allocating foreign currency,” said Dr Mupunga.
“. . . when you introduce a policy, especially that policy where the rate started at a lower level, initially you have a situation whereby you have more buyers and less sellers.
“So, this is what has actually been happening but going forward, the foreign currency situation would be solved from our exports and also in other foreign currency inflows.”
Dr Mupunga’s clarification followed concerns raised by Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu, who said preliminary indications are that the interbank market is struggling to cope with demand.
“The lifting of the 1:1 exchange rate in favour of the floating interbank, has meant that the manufacturers and suppliers of products, troop to the interbank.
“Unfortunately, there are more buyers than sellers and (with) the willing buyer-willing seller (system), we are currently challenged on the interbank,” said Mr Mutashu.
Mr Mutashu said industrialists and retailers are now turning back to the black market to source foreign currency for business to continue.
“A lot of players are trooping to the interbank but unfortunately a lot of times it’s dry. So, that then forces business to still go back to the alternative market, and the alternative market is the black market where rates are not controlled, they can change any time, any day.
“And unfortunately, one has got to make a decision between closure and continuation. A lot of times, because we love our country, we have to try and find ways and means to continue but the environment is quite difficult,” said Mr Mutashu.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe, also said starting with a lower rate was appropriate but it has caused holders of foreign currency to shy away from the interbank market, presumably to wait until a higher rate was obtaining.
“Unfortunately, what has happened is that a lot of the players, particularly the sellers, have felt that the rate was too low and (are) not influenced by the willing buyer-willing seller.
“We are, at the moment, as private sector trying to meet as players to try and understand the market,” said Jabangwe.
Yesterday, the average interbank rate was 3,1422 while the parallel market was hovering at about 1:5.
Finance and Economic Development Minister Professor Mthuli Ncube conceded in an interview with Bloomberg TV in Washington DC last week that forex is in short supply, but foresees an improvement in the near future, driven by tobacco sales which would earn up to US$1 billion.
Who determines black market rates?
Mr Mutashu queried the identity of the person or institution that determines the parallel market rates for forex.
He believes the person or institution, should be a strong force as black market forex rates are largely uniform across the country.
“You also wonder who that person or animal or creature is?
Where does he stay, the one who manipulates the black market foreign currency rates? Is it a he or she?
“Is it a company or an individual? If it is a company, why don’t we close it? If it’s an individual (why don’t we deal with it)?”
There are suggestions that companies that import top-of-the-range vehicles could be behind to parallel market as they sell vehicles in both the RTGS dollars and forex.
Experts suspect the RTGS dollars from vehicle sales could be feeding the parallel market. Mr Mutashu said companies and consumers have suffered for a long time because all the input costs are going up.
The sourcing of forex on the parallel market by companies has exposed consumers to high prices as premiums are too high.