The past week has been characterized by two main issues that include lobbying for loan guarantee facility by players in the tourism sector and that of businesses being given two weeks to regularize their systems so that they can comply with the statutory instrument on the receipting of goods and services in either foreign currency or local currency.
Issues of the exchange rate, bailout relief package have progressively become the focal point of local economic discourse as uncertainty continues to grip the country’s future.
There has been a surge in the use of the US Dollar in the market. Some service providers pegged prices of services in line with parallel market exchange rates so as to lure customers to pay using forex. The government had to come up with some measure in an attempt to deal with the disparity between the auction exchange rate and the alternative market which remains a concern to businesses and a source for arbitrage.
After the announcement of the SI, street rates started going up from 120:1 to 140 to the US dollar depending on the mode of payment.
Economist Yona Banda said it is fair to expect businesses receiving forex at the auction rate to price accordingly.
“Protecting disposable income for consumers in these times is important. Although, it strikes me as a procedural issue on the operations of the auction than a legislative issue. Hopefully there’s a monitoring system in place for the central bank to enforce the SI.”
Businesses are supposed to issue receipts in the currency of transaction and the Zimbabwe Revenue Authority encouraged members of the public to report if they get receipts in a currency, they did not pay in. However, experts say the country is well known to be good at crafting policies but fails on the implementation side.
On the other hand, liquidity in the economy is poised to remain constrained until a bail-out relief package is implemented.
In the short term, Banda said a bailout package is definitely the most ideal relief for the lack of liquidity.
“Particularly if it is a bailout package on sustainable terms. In the absence of such a development, the current approach seems to be ensuring the flow of scarce forex to critical economic sectors. It is unclear how sustainable the approach will be going forward.
“Clearly the long-term focus has to be on implementing policy reforms needed to improve Foreign Direct Investment inflows, trade performance and fiscal management,” he said.
Previously, lack of investment in the country was attributed to lack of investor confidence, largely emanating from government’s policy inconsistencies.
Recently, the International Monetary Fund spokesman Gerry Rice said, the Fund continues to provide policy advice and capacity development to Zimbabwe.
“We are precluded from providing financial support at this point, due to an unsustainable debt and official external arrears at the situation.”
Output in Zimbabwe is expected to expand in 2021 on the back of a good agricultural season. Experts warned that the pandemic is likely to cloud the pace of the recovery – Harare