In a statement after the meeting yesterday, RBZ Governor Dr
John Mangudya said all parties underscored the need to maintain the
macroeconomic stability momentum experienced in the last 12 months and based on
economic fundamentals.
This has been based on balanced budgeting, control of money
supply, total inflows of foreign currency exceeding total outflows, and the RBZ
auction system to set exchange rates.
The black-market rates were the result of behavioural
factors, not economic factors since the fundamentals were still sound.
On its part, the RBZ undertook to regularly monitor
monetary and foreign exchange developments to ensure the exchange rate remains
stable, to continue using the auction system and to ensure that delays between
successful bids and allotments of foreign currency do not recur.
Measures include tightening rates in the banking sector to
discourage speculative borrowing and with banks undertaking to be more active
in ensuring their customers do not cheat.
“The Reserve Bank of Zimbabwe, together with the Ministries
of Finance and Economic Development and Industry and Commerce, met with leaders
of the Zimbabwe business community on October 11, 2021, to deliberate and find
solutions to the volatility of the parallel market exchange rates which
adversely affects economic growth by creating business uncertainty as well as
increasing domestic prices,” said Dr Mangudya.
“The parties unanimously agreed that while macroeconomic
fundamentals were sound to support exchange rate stability, immediate measures
were necessary to contain the movement of the parallel exchange rates.
“It was noted that the recent volatility in the parallel
exchange rates was due to behavioural factors. In order to address these
negative behavioural traits, it was agreed that a holistic and collaborative
approach was required.”
As part of efforts to address the currency challenges, the
Government affirmed its commitment to continue supporting the foreign exchange
auction as a dependable and transparent source of foreign currency in the
country.
The RBZ undertook to: continue tightening money supply
under its conservative monetary targeting to ensure that money supply would not
be a source of exchange rate destabilisation; accelerate implementation of
special attractive money market instruments including exchange rate linked
instruments as an alternative investment avenue for local currency to the
holding of US dollars.
The central bank also proposed a review of bank policy
rates to curb speculative borrowing, refining and streamlining the foreign
exchange auction system to ensure that it continues to play its price discovery
role in the foreign exchange market, and dealing with the funding backlog of
foreign exchange allotments.
Appropriate measures to ensure the foreign currency
allotments backlog does not recur, will also be taken.
Dr Mangudya said the Bankers Association of Zimbabwe (BAZ)
committed to ensuring all bids submitted to the foreign exchange auction are
authentic, that due diligence on all their customers and applications for foreign
exchange was done and avoiding facilitating black-market transactions.
BAZ also committed to improving efficiency in facilitating
letters of credit, enhancing reporting of suspicious transactions, promptly
implementing regulatory directives on freezing of bank accounts for
participants in illicit foreign currency transactions, promoting confidence in
the banking sector by clearing the foreign currency backlog promptly, and
improving oversight on bank overdrafts to ensure that broad money is kept under
check.
Retailers, who have dramatically increased prices in recent
days, did not say if they will immediately reduce prices to the obtaining
official rate.
The retailers requested Government to deal with illegal
foreign currency traders who mill outside and around shops and other trading
areas, identifying and bringing to book funders of foreign currency traders,
and dealing with informal traders operating without licences and sometimes
outside legal or policy parameters.
Dr Mangudya added that the retailers noted the need to
adhere to expected commitments to implementing provisions of Statutory
Instrument 127 of 2021 with emphasis on three focus areas such as abuse of
auction rules and funds from auction allotments, exchange rate manipulation or
currency attacks, and non-compliance with the Bank Use Promotion Act.
SI 127 of 2021 mainly seeks to instill discipline in the
foreign exchange market by imposing civil penalties on individuals and
businesses who fail to adhere to the Government’s policy on foreign exchange.
Dr Mangudya said retailers were also advised that discounts
could be extended to customers in the normal course of business as long as they
are reasonable and in line with best practice, while entities using the
official exchange in their pricing system might apply a tolerance premium of up
to 10 percent in line with operations of bureaux de change.
The manufacturing sector undertook to ensure responsible
pricing.
Government and the RBZ pledged to continue supporting the
manufacturing sector by levelling the playing field to ensure that exporters
obtain a fair value of their export earnings.
Confederation of Zimbabwe Retailers president Mr Denford
Mutashu said the discussions were “fruitful” and all parties have committed to
the “development of our economy”.
“Government and business are both working towards
stabilising the exchange rate environment,” said Mr Mutashu.
Pan-African Chamber of Commerce board member Mr Langton
Mabhanga said: “Discipline must go beyond talk shows. Abusers of the auction
proceeds must be held accountable. To many, it’s more profitable to just access
auction proceeds than to run actual business.
“We also need to take action on foreign businesses
transacting in US dollars on a cash basis, yet they remit zero to Zimra. They
top the allocation list yet are trading illicitly.
“The banks’ Know-Your-Customer must be alive. The
quasi-licensing authorities must scrutinise businesses before issuing import
permits, operating licences and foreigners coming in as expatriates. Allowing
fair trading of the auction system and awarding forex to deserving recipients
would curtail the exchange rate.” Herald
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