|There is high optimism that the exchange rate stability achieved so far if it continues to prevail is poised to create a conducive operating environment for businesses and the attraction of local and international capital essential to push the much needed economic growth for the country.|
The Reserve Bank of Zimbabwe (RBZ) discarded the fixed rate of US$1 to ZWL25 prescribed at the onset of the coronavirus pandemic at the end of March. The coming in of the first foreign currency auction in years was expected to boost transparency and efficiency in the forex market.
At least US$1.17 billion has been allotted to the productive sector of the economy since the introduction of the weekly foreign currency auction trading system in June last year, according to the RBZ.
Though the exchange rate had somewhat stabilised the market remained distorted and with operating expenses of many listed firms continuing to reflect a premium to this rate. Possible cause of this is the time lags in payment of foreign suppliers after having bid allocations on the foreign exchange auction system.
This comes as some sections of the economy say there is no justification to make the auction rate aligned to the parallel market rate. The Zimbabwe dollar is now trading at 84.61 to the US dollar which is far below the price on the black market, where it trades about 125 to the dollar.
Economist Yona Banda told this publication that the premium in the parallel market naturally creates an incentive to get the extra value from the US dollar for consumers.
“Since forex is basically a scarce resource right now it would be ideal if that forex could be kept in the formal economy where it can be used productively,” he said.
The World Bank named Zimbabwe among the top 10 remittance recipients in Sub-Saharan Africa in 2020. In flows to Zimbabwe stood at $1.2 billion from $635.7 million in 2019.
“I think if we consider that private remittances are Zimbabwe’s biggest source of forex, the disparity in rates is not something that can be ignored for long.”
What remains of concern to many people is the widening gap between the official auction rate and the parallel market rate which creates room for rent-seeking behavior. However, it should be noted that US dollar deposits have been on the rise.
“I think the same incentive is there for corporates, especially if they are accessing forex at the RBZ rates. Hopefully the RBZ has adequate controls and surveillance systems to monitor rent seeking from such corporates,” Banda said.
Also listed firms say if the economic improvements accompanied by a level of fiscal discipline can be maintained, they project a better financial performance for the remainder of the year – Harare