CZI calls for boycott of high forex rates
The Confederation of Zimbabwe Industries (CZI) says the market should boycott high rates of foreign currency on parallel market as they are not backed by any economic fundamentals, adding the country should reduce its insatiable appetite for imports that is also gobbling the little forex available.
CZI president Mr Sifelani Jabangwe said this last week, adding that boycotting the parallel market rates would cause them to tumble, resulting in lower prices of goods and services in the country.
The obtaining situation where companies that fail to buy foreign currency on the interbank float system ended up fetching it from the unofficial market was poisoning the economy, leading to distortions and tier pricing.
“Why do we keep following the rate? Where is the resistance somewhere?” queried Mr Jabangwe.
“I think we are saying as business sector, instability (of forex rates) is also causing instability of our businesses. As the buyers, sometimes we must shift to where we say no, this doesn’t seem to work.
“. . . for the rate to pull upwards each time we are in our tobacco selling season, it doesn’t sort of make sense. If you don’t buy and the rates collapse, they are in trouble. So I think there is need for some sort of resistance to this unless there is information to why it’s justifiable that the rate should rise in the way that it is doing.”
Zimbabwe has witnessed high prices of goods in recent weeks as retailers adjusted them in line with the foreign currency rates.
The parallel market rate was pegged at 1: 4,5 (USD to the RTGS$), a move that has caused price madness in the market.
Mr Jabangwe said foreign currency rates instability were not ideal for business given that manufacturers may fail to restock if they price their goods wrongly.
“This is a genuine fear that is in business and we need to see how we can address this. The movement to the (introduction of the) interbank market is a good thing because it’s a barometer of how our policies are,” said Mr Jabangwe.
He added that if policies were friendly, especially on importation of products that can be produced locally, that would reduce pressure of foreign currency and result in the forex rate declining.
There is a concern by industry that the imports of dairy products, toothpicks and construction materials, remains sky high despite their availability on the local market.
Said Mr Jabangwe: “At the moment, if you look at our import basket, we are still importing goods that do not reflect that this is a critical commodity (forex) and we end up not having enough of it for the critical areas and that results in challenges.”
Some industrialists have said the parallel market rate for forex continues to spiral due to a shortages of the hard currency on the interbank market, due to the low average rate.
Last week, the rate was 1:3,1422.
Prof Ncube speaks on interbank rate
But Finance and Economic Development Minister Professor Mthuli Ncube told The Sunday Mail Business that there are no fundamentals supporting a “high rate” on the interbank market.
Prof Ncube said on the fiscal front, Government has been running a monthly surplus, implying that the budget deficit is “actually a surplus”, which doesn’t contribute to money creation.
If anything, money supply growth has dropped substantially, “so, really, there is no pressure on the rate in terms of the domestic demand”.
Prof Ncube also said industrialists and individuals are also devoid meaningful RTGS balances of domestic cash, raising questions on where the demand for foreign currency is coming from.
“So, if you look at market fundamentals, they are not pointing towards a higher demand for foreign currency, on the contrary, we should be having a lower demand for forex. We are also just starting the tobacco selling season and obviously we should see increased inflows of US dollars,” he said.
Prof Ncube said an International Monetary Fund (IMF) team was recently roped in to “look at the architecture” of the interbank market and help the country to “strengthen it, help us finance it, let’s make sure that it works, it becomes a credible market”.— Sunday Mail