Chronicle Editor
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VICTORIA Falls Stock Exchange (VFEX)-listed Axia Corporation Limited says the reduction in interest rates for local currency had a positive impact on business operations for the quarter ended 31 March 2023 as the group was able to access working capital in local currency.
However, the business has noted with concern the adverse impact of the resurgent inflationary pressures emanating from the latest exchange rate volatility, which it says is a threat to its ability to trade in the formal market.
During the period under review, the Reserve Bank of Zimbabwe (RBZ) further reduced interest rates from 150 percent to 140 percent effective April 1.
Earlier the Central Bank had also raised the bank policy rate from 60 percent to 80 percent in response to the need to discourage speculative spending and reduce inflation, which had increased from 60,68 percent in January to 72,7 percent in March last year.
The bank policy rate was later increased from 80 percent to 200 percent in June and reduced to 150 percent early this year.
In its trading update for the third quarter ended 31 March 2023, Axia Corporation said at the tail end of the quarter, there were increased levels of exchange rate volatility, and the gap between the formal exchange rate and the alternative market rate widened.
“The reduction in ZWL interest rates had a positive impact on the operations and enabled the group to access working capital funding in local currency.
“The group has continued to participate on the official auction system to maintain reasonable pricing to our customers,” said AXIA.
“However, as retail and distribution do not rank in higher allocation tiers, the business continues to face significant foreign currency gaps, which manifests in pricings risks, restocking challenges, and balance sheet preservation challenges.”
However, despite the challenges, the group noted that its performance for the quarter was positive and will continue to drive growth for the last quarter of the year.
“Management remains hopeful that progressive policies regarding money supply, exchange rate, and interest rates will be reinforced to foster stability in the market and gradual building of confidence,” it said.
“The group is focused on exploring the expansion opportunities available in the market.”
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