Analysts expect the exchange rate (official and parallel
market), which recently took a battering from the negative impact of excess
liquidity in the market, to strengthen going forward.
The bank wrote on its Twitter account after the wholesale
auction saying “At today’s wholesale foreign exchange auction for banks, out of
US$30 million on offer, only US$10 million was purchased by banks for onward
sale to banks’ clients.”
The central bank introduced the wholesale auction for banks
to purchase forex on behalf of their clients and reportedly guaranteed at least
US$15 million every week to liquefy the foreign exchange market.
This formed part of a cocktail of measures to stabilise the
exchange, after a period of rapid Zimbabwe dollar depreciation that led to
massive price increase in local currency.
Authorities have over the last two months rolled out
interventions that included transferring external payments obligations from RBZ
to Treasury, payment of all duties (except luxury for goods) in local currency
and increasing the bank policy rate from 140 percent to 150 percent.
Treasury last week announced additional interventions to
widen the usage of the domestic currency in the economy, which will see the
payment of all corporate taxes in local currency.
“Government will, for June 2023 Quarterly Payment Date
(QPD), require taxpayers to settle 50 percent of the foreign currency portion
of their corporate tax obligations in local currency. Where the law requires
the tax liability to be paid in local currency, taxpayers are compelled to pay
such tax obligations exclusively in local currency. The Government will
therefore not accept payments in US dollars or any other foreign currency for
the portion of corporate income tax due in local currency for the June QPD,”
said the Treasury in a statement.
Market reports indicate that most banks have, since the
introduction of the wholesale auction, been struggling to raise Zimbabwe dollar
funding enough to buy more than US$1 million at any given time.
Economist Tinevimbo Shava commented “Obviously these are
the effects of the demand-driving policies that were introduced and are
continuously being amended. We certainly are going to see another drop in the
rate as less demand is there.
“We are really embracing the initiative as a step in the
right direction provided it is implemented and fully realises the benefits of
consolidating the use of the Zimbabwe dollar and the exchange rate should
settle at around $5 000 to $6 000 per dollar or thereabout under these
conditions.”
Bankers Association of Zimbabwe (BAZ) president Lawrence
Nyazema said the local currency had been sucked out of the market in the past
three to four weeks and explained why banks were not able to buy much of the US
dollar on the wholesale auction for banks.
“We have a situation where excess local currency was
withdrawn from the market through prudent fiscal and monetary measures.
“Companies had to pay for their taxes, which (Treasury)
said to be paid in local currency to (at least) 60 percent, meaning that the
local currency is under heavy demand,” he said.
He added that the fiscal measures were a masterstroke as
they forced US dollar earners to liquidate their earnings so that they pay
taxes.
“The current Dutch Auction System is what we wanted and
hoped for three years ago when this thing was introduced and we are seeing a
constant supply of foreign currency on the official market to the point that it
is outstripping demand. We are happy that the measures have forced those that
earn 100 percent in foreign currency and had no use for the local currency are
now liquidating some of their proceeds to oil the foreign exchange market,
hence sustainability of the wholesale and foreign exchange market,” Mr Nyazema
concluded.
Economist Dr Prosper Chitambara said the creation of demand
for the local currency has caused such a position where supply outstrips
demand.
“It is a positive development that the Government required
companies to settle their tax obligations in local currency, I think this will
help to increase and enhance the value of the local currency which should have
a very strong stabilising effect on the exchange rate.
“Going forward the currency must start to feel the
pressures of its demand and hold on at a level that will bring stability to the
market,” he said. Herald:
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