Chronicle Editor
Nokuthaba Ncube/Lesley Chikudo/Amos Mpofu, Chronicle Writers
BUSINESSES and consumers have smoothly adjusted to the latest Reserve Bank of Zimbabwe (RBZ) measures, which have been commended for cooling down speculative parallel market activity while maintaining sound macro-economic stability and sustained productivity across economic sectors.
The Apex Bank last week liberalised the exchange rate, and devalued the Zimbabwe Gold (ZWG) by 42,5 percent to ZWG24,39, the first time since its adoption in April.
It also announced tightening of screws on loans by pushing the bank lending rate up from 20 percent to 35 percent with immediate effect, among other interventions.
Following the development, major businesses and service providers have smoothly adjusted their prices and have since last weekend been operating as usual with no disruption to service delivery.
Local authorities such as the Bulawayo and the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), quickly embraced the new exchange rate and adjusted their tariffs accordingly.
A snap survey conducted in Bulawayo on Monday revealed that most shops were using swipe in local currency as usual and had complied with the latest exchange rate movement although with minimal upward differences.
Others that previously refused ZWG transactions had now pegged their prices in local currency and were accepting the currency while some maintained forex pricing tags but allowed swiping on tills.
The new measures have, however, temporarily left money changers (Osiphatheleni) confused and starring at significant losses. As the market adjusts, dealers find themselves in a difficult position, needing to raise prices to cover costs while facing push-back from customers who anticipate to get higher rates in buying the local currency from them.
Those who spoke to Chronicle said they were frustrated by the rise in official exchange rate from US$1:ZWG14 to US$1 for ZWG24,39.
They said the sudden change had caught them off guard, as they had been making a killing getting cheap forex from members of the public at between US$1:ZWG14 to ZWG20 and selling at rates between ZWG25 and ZWG30 for a dollar, making good profit from it.
One dealer, who requested anonymity said: “I have almost ZWG15 000 in my accounts, which I loaded at ZWG28 early last week, targeting to resell at a range from ZWG18 to ZWG20 per dollar.
“Now, I’ll have to push my stock just to recoup my capital. Customers won’t accept anything less than ZWG25 in buying the ZWG with US dollars following the rise in rates, so I’m at a loss.”
Many dealers also voiced concerns about the recent volatility in the market suggesting that civil servants and others in need of foreign currency could be forced
Confederation of Zimbabwe Retailers (CZR) applauded the RBZ for the recent measures but underscored the necessity for a gradual approach to de-dollarisation, expressing apprehensions that an immediate and complete de-dollarisation could pose significant risks to businesses, consumers and the overall economy.
CZR president, Dr Denford Mutashu, said they recognise the delicate balance that RBZ must maintain in addressing the multifaceted challenges facing our economy.
“While some quarters are calling for dollarisation, others are for complete de-dollarisation, it is our submission that the multi-currency regime remains as is policy until 2030,” he said.
“De-dollarisation can only be possible if the economy can generate sufficient foreign currency to back demand.
“As the CZR, we strongly believe that any attempts to fully de-dollarise at this stage could have catastrophic consequences for both businesses and the broader economy.
“A hasty transition will amplify current economic challenges rather than alleviate them,” said Dr Mutashu.
Dr Mutashu indicated that the fuel sector remains one of the most sensitive areas in the economy, with the pricing of fuel pegged to the US dollar.
He said the transportation industry, a critical player in the retail supply chain, could also be affected and thereby drive up logistical costs and cause inflationary pressures.
“This will further undermine any efforts to stabilise the economy. The RBZ must consider these ripple effects, especially in an already fragile environment,” said Dr Mutashu.
“With the current foreign exchange allocation system, there is already challenges in meeting the demands of industries for US dollars. Full de-dollarisation would exacerbate these shortages as businesses will struggle to secure foreign currency to import essential goods and raw materials.”
Economist and National University of Science and Technology Department of Banking and Investment Promotion lecturer, Mr Stevenson Dlamini, said the devaluation of the currency has essentially pushed inflation up, particularly imported inflation.
He said this increase the cost of imported goods and services, which will consequently lead to the rise in informal retailers much to the detriment of formal retailers.
“This will consequently lead to the rise in informal retailers much to the detriment of formal retailers. It will however, reduce purchasing power of people’s incomes, especially civil servants and those on fixed incomes such as pensioners,” said Mr Dlamini.
He applauded the MPC’s decision to hike the bank policy rate from 20 percent to 35 percent saying this will reduce speculative borrowing, which is a driver of inflation.
“The decision to reduce the amount of foreign currency that individuals can take out of the country (from $10 000 to $2 000) is a form of capital control, aimed at limiting capital flight,” said Mr Dlamini.
“This will increase foreign reserves, which will prioritise critical sectors like retailers.
“Also the decision to introduce flexibility in the exchange rate market will help narrow the black market premium and encourage more prudent spending in the local currency.”
Some analysts have further noted the risk potential collapse of businesses and financial institutions should authorities push for immediate de-dollarisation.
They recommended that the RBZ carefully monitors the effects of these higher reserve requirements and be prepared to adjust them if they lead to excessive liquidity constraints that could harm the economy.
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