tawandamusarurwa
Business Reporter
Exporters have welcomed the current movement towards convergence of the formal and parallel market exchange rates in the market, saying it will close the gap for arbitrage and rent-seeking behaviour.
Depreciation of the Zimbabwe dollar and concomitant rise in prices of goods and services have been negatively affecting both exporters and consumers.
Following measures by both Treasury and monetary authorities to tame resurgent inflationary pressures and stabilise prices, the gap between the formal and parallel market exchange rates has been narrowing.
The wholesale foreign currency auction on June 7 closed at US$1: $4 868, while rates were being quoted at over $5 000 to the greenback on the parallel market by the end of last week.
“This is a welcome development,” said former Confederation of Zimbabwe Industries (CZI) chairperson of the trade and investment promotion committee, Mr Henry Nemaire.
“As exporters, we were paying the price for the wide disparity that existed between the official and unofficial rates.
“The difference was such a huge tax to exporters, draining their profits, thus making their businesses unviable. The difference should not exceed 10 percent, otherwise business operations become unsustainable.”
FBC Securities research analyst Mr Enock Rukarwa said the move towards convergence is a welcome development as it eliminates market distortions and rent-seeking behaviour.
“Against the backdrop of a widening premium, these obtaining circumstances were now breeding ground for arbitrage opportunities, to the detriment of the overall economy,” he said.
“Religious operation of a pure Dutch auction system and a perfectly competitive interbank market will anchor a thin disparity between official and alternative market rate going forward.
“Willingness to transact on the exporters’ side is a function of an efficient price. A perfectly competitive exchange rate will always clear market imbalances.”
Since the advent of the Covid-19 pandemic and the Russia-Ukraine war, which have led to rising commodity prices and disruptions in global supply chains, the economy has continued to grapple with the pass-through effects of global inflation, sluggish economic growth, increasing interest rates and rising energy prices.
As part of measures to ensure a return to stability, on May 29, Treasury inherited Reserve Bank of Zimbabwe (RBZ) external loans and announced additional measures to sterilise excess liquidity, tighten monetary policy, introduce a gold traceability system, as well as a 1 percent tax on foreign payments.
An undertaking was made to fine-tune the RBZ foreign currency auction market and promote use of the Zimbabwe dollar.
Civil society opine that the new measures are likely to bring the much-needed stability.
“The latest measures proposed by Treasury are arguably bold and could help clamp ongoing massive Zimbabwe dollar exchange rate depreciation and skyrocketing Zimbabwe dollar prices, if fully implemented,” said the Zimbabwe Coalition on Debt and Development (ZIMCODD).
An executive of one of the leading wholesalers, who spoke on condition of anonymity, told The Sunday Mail Business that expenses were beginning to dollarise faster than income.
“Wages and salaries have been decimated. We are chasing a rapidly moving target and consequently staff turnover is increasing. We are in danger of only selling volumes when our price is no longer profitable due to rate movements,” he said.
“Expenses are dollarising faster than income.
“Most expenses are in hard currency versus most incomes in a very soft currency. We are being undercut on price and beaten on availability of stock by informal players who have the flexibility to respond to the environment . . .”
Online Reporter