The Sunday Mail
Sunday Mail Journalists
THE Reserve Bank of Zimbabwe gave assurances that the foreign currency auction system would remain in place and insisted the apex bank ‘has no reason or inclination to loot the (foreign currency) accounts as the industry lobby group, the Confederation of Zimbabwe Industries alleges.
In a Friday post, CZI had proposed that the RBZ scrap the auction system after parallel market rates rose to levels around $350 to the US dollar last week.
“The currency auction system remains in place and will not be suspended as this would lead to shortages of goods in the market and promote inflation. All currency accounts are safe and the bank has no reason or desire to loot accounts,” RBZ Governor Dr. John Mangudya said in a statement yesterday.
The central bank said the issues raised by the industry representative group were unnecessarily speculative and unsubstantiated.
“The Reserve Bank of Zimbabwe (the Bank) wishes to draw public attention to the fact that the content of the CZI document is a response to rumors and not based on facts on the ground. The contents of the CZI document and the impressions depicted therein are unfortunate and unjustified as they have the potential to destabilize the financial markets and the economic stability of the country,” he said.
The government and the RBZ, he added, have engaged “in an orderly de-dollarization process and therefore it is wrong that a single currency system is now in place.”
In its paper, the CZI proposed what it called “true liberalization of the foreign exchange market where banks act as matchmakers linking buyers and sellers of foreign currencies.”
Speaking to the Sunday Mail yesterday, economist and RBZ monetary policy committee member Mr Persistence Gwanyanya said the local economy was far too concentrated for full currency liberalization to be effective.
“The challenge in our economy is that foreign currencies are concentrated in the hands of a few. Note, for example, that of the US$9.7 billion in foreign exchange earnings that flowed into the economy last year, US$6 billion came from exports. And, of these exports, about 85% are represented by a few basic products such as gold, diamonds, platinum and chrome.
“Therefore, full liberalization cannot be an effective price discovery system. Why would companies like Mimosa or Zimplats, for example, sell currencies when they are also sitting on Zimbabwean dollar balances? »
Economist Mr. Eddie Cross said it was important to boost market confidence in the Zimbabwean dollar.
“The reason for the parallel market rate run is simply the lack of confidence in the currency itself and also the desire to hold US dollars rather than the local currency,” he said.
During a recent dialogue with stakeholders in the insurance industry, the Minister of Finance and Economic Development, Prof. Mthuli Ncube said that the government is closely monitoring factors that may negatively impact the currency local.
“The fundamentals of a strong currency are in place. The value of a currency will respond to the size of a budget deficit. I made it clear that I don’t preside over deficits; I’m just balancing the budget.
“Secondly, there is the question of the monetary targeting regime. We target currency M0 (M-zero), reserve currency growth; currently our target is 7.5% per quarter. So we are on the right track and we will continue to reduce,” he said.
Earlier last week, Professor Ncube announced that 50% of import duty on vehicles will now be paid in local currency at the prevailing official auction rate, underlining the importance of trading in local currency.