THE continued consolidation of the Zimbabwean dollar gains on the official market-driven foreign currency auction platform has created huge demand for the local currency on the back of growing confidence levels as well as price stability.
The weekly foreign exchange auction system, which started
in June this year, has ushered in a more predictable foreign exchange market
that is conducive for sustainable economic development, economic experts have
said.
Industry executives and traders have also lauded the
platform, saying it has greatly assisted the productive sector in procurement
of critical raw materials as well as taming price escalation. This, coupled
with tightening of money supply growth and the recent clampdown on illicit
mobile money transactions, has effectively contained the speculative parallel
market dealers. The local dollar appears to have reached stability at US$1:$81.34
this week, having maintained a firming position in recent weeks from the
highest level to date of $83,39 on August 25.
The Reserve Bank of Zimbabwe (RBZ)’s Monetary Policy
Committee has said that it expects the resultant price stability to continue
prevailing in the economy during the last quarter of the year mainly on account
of the improved operating business environment brought about by the foreign
exchange auction system. While foreign currency usage is permissible, the
Zimbabwean dollar, in both cash and electronic form, is now highly sought after
and seemingly in short supply instead of forex.
Businessman and member of the RBZ Monetary Policy
Committee, Mr Eddie Cross, confirmed the development and said the demand for
the local dollar was a confirmation of the expanding market.
“The shortage of RTGs is a function of the market, the
market is beginning to expand, people are increasing trading in local currency
and as a result, shortages have surfaced. If we were to print money to cover
the shortage it will be inflationary, so we are not going to do that,” said Mr
Cross.
“We have been deliberately restricting RTGs (electronic
money) because historically that has been the main source of inflation in
Zimbabwe. This tight money supply we are going to maintain it for the present
time. If people want RTGs they have to either sale foreign currency in exchange
for RTGs or earn for RTGs.
“The velocity of money is very considerable in Zimbabwe. We
trade about $3 billion a day in RTGs. So, it’s not a question of not trading,
we are trading.”
Mr Cross said the country has had slight or zero inflation
increase in the last two months and expectation was that stability would
persist up to the end of the year. United Refineries Limited chief executive
officer, Mr Busisa Moyo, has also acknowledged that getting the local dollar
was now a tough task. “Times change and experiences may differ though. I never
thought as operators we would be hunting, cutting deals and discounting to get
local currency (RTGS/ZWL),” he posted on his Twitter account.
Economist, Professor Gift Mugano, concurred that Zim-dollar
was on high demand and lauded RBZ for containing money supply.
“The RBZ has done well in managing money supply. Their
periodic update has shown that they are containing money supply. I think the
Minister of Finance as well in his budget, as you saw in July, did not provide
a supplementary budget in the mid-term budget review, and that has stabilised
money supply growth,” he said.
“The economy fields are growing because we have a lot of
activities going on. We have actually confronted the agricultural season and
there is high demand for input supply. The other thing, which has happened is
that the Central Bank has allowed all economic agents to use foreign currency
in the market. So, that has formalised the availability of foreign currency as
it was not allowed before.”
With 16 auctions having been conducted to date and a total
amount of US$291 million having been allotted, the Apex Bank has also said it
was pleased that the foreign exchange auction has managed to improve the
much-needed availability of foreign exchange. In the past the supply of foreign
currency was from exports, diaspora domestic remittances and investment but now
these streams are being supplemented by the domestic generation of foreign
currency. Illegal money changers who spoke to Business Chronicle on condition
of anonymity in Bulawayo said they were experiencing scarcity of all forms of
local money, which was weighing heavily on their business.
“We struggle to get RTGS and cash these days. Ecocash is
now scarce and the biggest problem is the daily limit of $5 000. As I speak, I
have finished mine and now have no float,” said the trader. Others said the
going was tough mid month and only gets better on month ends.
“It’s always dry now until civil servants and others
receive their pay. That’s the only time we get RTGs through Zipit as many would
want to buy foreign currency. The other thing is that the difference between
cash and EcoCash is now very small,” said another trader.
Some super markets are also tapping into exchange rate
gains by offering higher rates than illegal money changers, cashing in on
people who do not have change in forex. RBZ Governor, Dr John Mangudya, has
said the bank will maintain a stranglehold on reserve money targeting policy
framework to keep exchange rate stability and tame inflationary pressures.
He is on record saying the Apex Bank was now selling more
foreign currency than it is buying from holders of the hard currency, which
shows the forex auction system has capacity to whittle down the amount of local
currency in circulation.
However, Prof Mugano says money supply containment might be
short-lived should the Government opt to increase civil service wages in tandem
with the cost of living, which is pegged at around $17 200 for a family of
five, according to Zimstat. Most workers earn far below that mark. Post Covid-19,
the complete opening of borders is also likely to result in the country losing
some foreign currency to imports, which will likely tilt the scales, experts
say. Chronicle
0 comments:
Post a Comment