Vusumuzi Dube
INTERVENTIONS by the Government and the Reserve Bank of Zimbabwe have managed to bring back sanity in the foreign currency exchange market, with the local currency taking a firm stand. This was after the exchange rate of the local currency to the United States dollar was galloping in recent months, with businesses using the black market rate to price their goods and services.
Analysts last week acknowledged that the cocktail of measures implemented by the Government since the beginning of May have managed to halt the wild parallel market rate run — the major driver of local inflation — translating to local currency-denominated price stability in the formal market.
The Zimbabwe dollar exchange rate gained nine percent against the United States dollar on the Reserve Bank of Zimbabwe (RBZ) wholesale foreign currency auction for banks last Tuesday, the second time within a week, as local currency liquidity continued to tighten across the economy.
Our sister paper, The Herald, said the Zimbabwe dollar exchange rate had gained for only the 15th time against the greenback on the official market since the inception of the auction post-dollarisation when it rose to $6 840.
Analysts said a ready market for rightly priced foreign currency means formal businesses no longer see the economic benefit of buying forex on the parallel market at huge premiums, which has been exerting pressure on the exchange rate. According to the central bank, excessive demand for the US dollar in Zimbabwe is driven by two major factors namely, the need to pay for imports and to preserve value.
Bankers Association of Zimbabwe president Mr Lawrence Nyazema told our sister paper, The Herald, that the local currency had been sucked out of the market in the past three to four weeks and this explained why banks were not able to buy much of the US dollars 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“We have a situation where excess local currency was withdrawn from the market through prudent fiscal and monetary measures.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 have to pay for their foreign currency taxes, which (Treasury) said have to be paid in local currency to (at least) 50 percent, meaning that the local currency is under heavy demand,” he said.
Reserve Bank of Zimbabwe Financial Intelligence Unit (FIU) director-general Mr Oliver Chiperesa is on record as saying Government measures and policies that were put in place to arrest forward pricing and malpractices fuelling exchange rate volatility were bearing fruit and stabilising the local currency.
“We have witnessed that for the first time in the last five or six weeks, the black market rate is now starting to stabilise because of the effectiveness of the policies that have been put in place which we are supporting as the FIU by making sure that those who destabilise the foreign exchange are dealt with severely in terms of the law.”
He said despite these efforts, there were still some rogue businesses that they continue to monitor to ensure that they were brought to book.
Online Reporter