‘Act swiftly to reverse resurgent exchange volatility’

THE Reserve Bank of Zimbabwe (RBZ) should act swiftly to contain the resurgent exchange rate volatility leading to the recent widening of the disparity between the official exchange rate and the parallel market.

Business leaders have expressed that unless urgent measures are taken to tame the parallel market forces, the weakening of the local currency will frustrate economic recovery efforts, as it strains operations of established businesses while promoting informalisation.

Reserve Bank of Zimbabwe (RBZ)

The state of the country’s currency situation was top of the agenda here yesterday as delegates to the 2024 Chartered Governance and Accountancy Institute of Zimbabwe (CGAIZ), noted the resurgent exchange volatility with a double premium, which has adverse implications on price stability and general business viability.

Whereas the official exchange rate has remained stagnant at below US$1:ZWG14 since the introduction of the new Zimbabwe Gold currency, the parallel market rate has breached the US$1:ZWG25 mark, with some delegates saying it has reached ZWG30 to the dollar in Harare.

The trend has induced a fresh strain on businesses that worry about macroeconomic stability and price predictability, as it affects their ability to restock and remain going concerns.

Mr Busisa Moyo at the CGAIZ indaba

On the other hand, consumers have expressed concern that some businesses were already rejecting ZWG transactions while those accepting had increased their prices beyond proportion, which erodes purchasing power.
Intense debate ensued over the issue during a panel discussion on “Economic transformative agenda for Zimbabwe -the journey to Vision 2030”, whose panellists included industrialist, Mr Busisa Moyo, Zimra Commissioner General, Regina Chinamasa, economist Mr Kipson Gundani, and Mr Simbarashe Chinyemba from Mutapa Investment Fund.

ZWG Notes

Mr Moyo said the lack of a single exchange reference was a strain on established businesses as it indirectly incentivises informal operators while punishing formal businesses whose cost of doing business remains higher.
Ms Chinamasa concurred that the challenge of informality in the economy was a huge burden as it not only limits the tax body’s ability to collect critical revenue for the fiscus but creates arbitrage opportunities and a haven for some viable businesses to evade taxation through dipping their hands in the shady informal sector.

Mr Gundani weighed in saying the biggest challenge to businesses at the moment was macroeconomic uncertainty in the face of rising inflation due to the exchange movement.

Dr John Mushayavanhu

He suggested that inflationary forces could be stoked by either banks creating more credit in the market or printing more money by the Central Bank.

The participation suggested that urgent measures be taken to restore market stability noting that the ZWG had garnered commendable public confidence that should not be squandered as this could reverse the economic gains achieved so far.
Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mushayavanhu, is, however, on record saying the unwarranted printing of money would not happen under his watch, as he insisted that any additional cash injection into the economy would be in tandem with growing production levels.

The ZWG is a structured currency backed by gold reserves and a basket of other precious minerals and foreign currency reserves.

It was introduced in April this year as part of a focused journey towards de-dollarising the economy in the long term.
During the meeting, there were also calls for the Treasury to come up with measures to trip the national debt, which is hovering around US$21 billion and hampers the country’s ability to secure grants and fresh credit lines to oil its economy.-chroncile