Chronicle Editor
Eight months of currency and price stability appear to be turning the other way. Parallel market currency rates are beginning to accelerate at a pace we last saw in the first half of last year. Prices are rising in sympathy. This has tended to coincide with the Government decision in February to reduce the benchmark rate from 200 to 150 percent as inflation had been slowing down.
The Government is concerned as Vice President Constantino Chiwenga and Finance Minister, Professor
Mthuli Ncube said yesterday.
Speaking at the Zimbabwe International Trade Fair International Business Conference in Bulawayo, VP Chiwenga and Prof Ncube said there was no reason why the parallel market is resurging. The economy
is not short of foreign currency, in fact receipts last year reached a record US$11,6 billion.
Since the fundamentals are correct, the turbulence we are witnessing is, as we have always made clear, a result of indiscipline which must attract a solid Government response.
“I did say that we have responded to inflation domestically by raising interest rates,” said Prof Ncube.
“The interest rates have been quite high and of late we had started bringing down the interest rate. But I’m now wondering the recent hike in the exchange rates in other markets. Should I increase the interest rates? Please stop pushing that parallel market, because what we will do is increase the interest rates to 200 percent and beyond. Because that is what we know, so desist from operating in that market and pushing up the parallel rate. It is because this is very costly to everyone.”
When the Government reduced interest rates two months ago, we thought another reduction was due around mid-year as economic conditions at that time pointed in that direction.
However, some in the business sector seem to have gone back to their old destructive ways. That is regrettable. We urge the Government to be firm in redressing this recurring challenge so that elements causing it understand that indeed, authorities are serious in their agenda to maintain the economy on the correct path.
So, if a 200 percent interest rate will stabilise prices and the parallel market rates, there can be no reason why authorities cannot peg it that high. But that is not a step that the Government wants to
take, given the minister’s remarks. The market must not push him to do that.
They must support the Government in its efforts to achieve a balance in the economy – a stable
exchange rate and prices, a level of interest rates that allows those who want to borrow to do so, those who can lend to do so.
Online Reporter