Zimbabwe: RBZ, companies reach consensus on exchange rates and prices

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Africa Moyo – Deputy Editor-in-Chief

A number of deals were made yesterday between the Reserve Bank of Zimbabwe and leaders in the business sector to deal with what everyone has agreed to be unwarranted jumps in black market exchange rates and the pricing that results in some areas.

In a statement after yesterday’s meeting, RBZ Governor Dr John Mangudya said all parties stressed the need to maintain the momentum of macroeconomic stability seen over the past 12 months and on the basis of economic fundamentals.

This was based on balanced budgeting, control of the money supply, total inflows of foreign currency exceeding total outflows, and the RBZ auction system to set exchange rates.

Black market rates were the result of behavioral and not economic factors as the fundamentals were still strong.

For its part, the RBZ is committed to regularly monitoring currency and exchange developments in order to ensure that the exchange rate remains stable, to continue to use the auction system and to ensure that delays between successful bids and currency allocations do not recur.

The measures include tightening rates in the banking sector to discourage speculative borrowing and banks pledging to be more active to ensure their customers don’t cheat.

“The Reserve Bank of Zimbabwe, in collaboration with the Ministries of Finance and Economic Development and Industry and Trade, met with leaders of the Zimbabwe business community on October 11, 2021, to deliberate and find solutions the volatility of parallel market exchange rates which negatively affects economic growth by creating uncertainty for businesses and increasing domestic prices, ”said Dr Mangudya.

“The parties unanimously agreed that while macroeconomic fundamentals were strong to support exchange rate stability, immediate action was needed to contain the movement of parallel exchange rates.

“It was noted that the recent volatility of parallel exchange rates was due to behavioral factors. In order to address these negative behavioral traits, it was agreed that a holistic and collaborative approach was needed.”

As part of efforts to address currency challenges, the government has affirmed its commitment to continue supporting currency auctions as a reliable and transparent source of currency in the country.

The RBZ is committed to: continuing to tighten the money supply as part of its conservative monetary targeting to ensure that the money supply is not a source of exchange rate destabilization; accelerate the implementation of attractive special money market instruments, including exchange rate instruments, as an investment alternative for local currency to holding US dollars.

The central bank has also proposed a review of key bank rates to curb speculative borrowing, refine and streamline the currency auction system to ensure it continues to play its role of price discovery in the currency market. foreign exchange, and deal with the delay in funding foreign exchange allocations.

Appropriate measures to ensure that the backlog of foreign exchange allocations does not recur will also be taken.

Dr Mangudya said the Zimbabwe Bankers Association (BAZ) is committed to ensuring that all bids submitted to the currency auction are genuine, that due diligence has been carried out on all of their clients and requests. and avoid facilitating black market transactions.

BAZ is also committed to improving efficiency by facilitating letters of credit, improving reporting of suspicious transactions, quickly implementing regulatory guidelines on freezing bank accounts for participants in illicit foreign currency transactions. , building confidence in the banking sector by rapidly clearing the currency backlog, and improving oversight of bank overdrafts to ensure broad money is under control.

Retailers, who have drastically increased prices in recent days, have not said whether they will immediately cut prices to the going official rate.

The retailers called on the government to deal with illegal foreign exchange traders who work in and around stores and other commercial areas, to identify and register the backers of foreign exchange traders and to deal with them. informal traders operating without a license and sometimes outside legal or political parameters.

Dr Mangudya added that retailers noted the need to meet the expected commitments for the implementation of the provisions of Statutory Instrument 127 of 2021 with a focus on three areas of intervention such as abuse of rules auction and funds from auction awards, manipulation of exchange rates or currency attacks, and non-compliance with the law on promoting the use of banks.

The main objective of SI 127 of 2021 is to instill discipline in the foreign exchange market by imposing civil sanctions on individuals and companies that do not comply with the government’s foreign exchange policy.

Dr Mangudya said retailers have also been told that discounts could be extended to customers in the ordinary course of business as long as they are reasonable and in line with best practice, while entities using the official exchange in their system pricing could apply a tolerance premium of up to 10% in accordance with the operations of exchange offices.

The manufacturing sector is committed to responsible pricing.

The government and the RBZ are committed to continuing to support the manufacturing sector by leveling the playing field to ensure that exporters get a fair value for their export earnings.

Zimbabwe Retail Confederation President Denford Mutashu said the talks were “fruitful” and all parties pledged to “grow our economy”.

“Both government and business are trying to stabilize the exchange rate environment,” Mutashu said.

Mr. Langton Mabhanga, Board Member of the Pan African Chamber of Commerce, said: “Discipline must go beyond talk shows. Attackers of the auction proceeds must be held accountable. For many, it is more cost effective to simply access the auction proceeds than to run a real business.

“We also need to take action against foreign companies that transact in US dollars in cash, but they don’t pay Zimra any money.

“Knowledge of bank customers must be alive. Quasi-licensing authorities must vet companies before issuing import permits, business licenses and foreigners entering as expatriates. the exchange rate. “


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