The Reserve Bank of Zimbabwe (RBZ), the Ministries of Finance, and Industry and Commerce today had a meeting with captains of industry to deliberate on the matter of the exchange rate and the parallel market rate.
Here’s the statement from the RBZ about the meeting and the resolutions that were arrived at:
The Reserve Bank of Zimbabwe (the Bank), together with the Ministries of Finance and Economic Development and Industry and Commerce, met with leaders of the Zimbabwe business community on 11 October 2021 to deliberate and find solutions to the volatility of the parallel market exchange rates which adversely affects economic growth by creating business uncertainty as well as increasing domestic prices.
The parties unanimously agreed that whilst macroeconomic fundamentals were sound to support exchange rate stability, immediate measures were necessary to contain the movement of the parallel exchange rates. It was noted that the recent volatility in the parallel exchange rates was due to behavioural factors. In order to address these negative behavioural traits, it was agreed that a holistic and collaborative approach was required. In that regard, Government, the Bank and the business community made firm pledges and commitments as follows:
GovernmentGovernment affirmed its commitment to continue supporting the foreign exchange auction as a dependable and transparent source of foreign currency in the country.
Reserve Bank of Zimbabwe
The Bank undertook to:
i. continue tightening money supply under its conservative monetary targeting framework to ensure that money supply would not be a source of exchange rate destabilisation;
ii. accelerate implementation of special attractive money market instruments including exchange rate linked instruments as an alternative investment avenue for local currency to the holding of USD;
iii. review bank policy rates to curb speculative borrowing;
iv. refine and streamline the foreign exchange auction system to ensure that it continues to play its price discovery role in the foreign exchange market; and
v. deal with the funding backlog of foreign exchange allotments and take
appropriate measures to ensure that the backlog does not recur.
Bankers Association of Zimbabwe (BAZ)
BAZ committed to: –
i. ensuring that all bids submitted to the foreign exchange auction are authentic;
ii. ensuring continued due diligence on all their customers and applications for foreign exchange;
iii. refraining from facilitating parallel market transactions through matching;
iv. improving efficiency in facilitation of Letters of Credit;
v. enhancing reporting of suspicious transactions;
vi. promptly implementing regulatory directives on freezing of bank accounts for participants in illicit foreign currency transactions;
vii. promoting confidence in the banking sector by clearing the foreign currency backlog promptly; and
viii. improving oversight on bank overdrafts to ensure that broad money is kept under check.
Retailers Associations
The Retailers Associations requested Government to level the playing field in their respective operating environments by attending to: –
i. the menace of foreign currency traders milling outside and around shops and
trading areas;
ii. identifying and bringing to book funders of foreign currency traders; and
iii. dealing with informal traders operating without licences and sometimes outside legal or policy parameters.
The retailers noted the need to adhere to expected commitments to implementing provisions of Statutory Instrument 127 of 2021 with emphasis on three focus areas as follows:
i. Abuse of auction rules and funds from auction allotments;
ii. Exchange rate manipulation or currency attacks; and
iii. Non-compliance with the Bank Use Promotion Act.
The Bank also advised the retailers to take note of the following: –
i. Discounts could be extended to customers in the normal course of business as long as they are reasonable and in line with best practice; and
ii. Entities using the official exchange in their pricing system may apply a tolerance
premium of up to 10% in line with the operations of bureaux de change.
Manufacturing Sector
The manufacturing sector undertook to ensure responsible pricing and to comply with the three focal areas under the SI 127 of 2020 highlighted above.
On their part, Government and the Bank pledged to continue supporting the manufacturing sector by levelling the playing field to ensure that exporters obtain a fair value of their export earnings.Reserve Bank of Zimbabwe on Twitter
CONCLUSION
All the parties underscored the need to maintain the macroeconomic stability momentum experienced in the last 12 months.
The Bank, on its part, undertook to continuously monitor monetary and foreign exchange developments to ensure that the exchange rate remained stable.
You should also read
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- The government needs to fix its forex auction
- Ministry of Finance sanctions snap audits, licence suspensions to curb USD black market deals
- The RBZ’s auction system takes up to 10 weeks to process payments
- Will rates fall & the black market die now that Bureaux de Change can now sell forex to individuals?
- RBZ to tighten money supply. What does that mean and how are they trying to achieve it?
13 comments
Hapana chataurwa apa🤬🤬
🤣🤣🤣
What exactly is different after this meeting?
As long as forex is not secure and easily available through the banks SMEs and buyers are going to find forex elsewhere. Make forex easily available from the bank and stop “taking” forex out of nostro accounts. Im not an expert but I think the only way to stop the parrallel traders is to make banks trust-worthy in keeping value of savings deposited and to make it easier to get forex through the banks than through parallel traders. Athough it might be helping I dont think exsisting systems are doing this properly, time for a new aproach please. This is my 2 cents worth.
This has nothing to do with trusting banks, there is forex in the banking system , some banks are even able to provide ATMs that spit out greenbacks. The problem is that the people/businesses that have it are not selling or at the very least, selling very little of it. I hate to sound like a brocken record, but i mentioned this back when government re-introduced the multicurrency system. The main difference with the new multicurrency era is that there is the Zim Dollar in the mix, like i said then, this was and still is a bad idea. The Zim Dollar cannot coexist along with other currencies as legal tender. More so when government is also trying to prop up its value.
In this current economic environment most have a preference for forex for obivous reasons. If you have forex you donot need Zim dollars, you can get by using your coveted Washingtons, all service providers will gladly accept it as payment (even government since tax is now payable in forex). This is a very important point, since those with forex donot need or have limited need for the local currency,means there is very little demand for Zim dollars. There is no one out there looking to buy a significant amount Zim dollars with their forex.
A simple example just to get my point across: Take South Africa, the rand is the only legal currency allowed. When investors and tourists go to SA or SA exporters receive their fx earnings , they HAVE TO change most of their fx to rands, this creates demand for the local currency in addition to the demand brought on by domestic use. In Zimbabwe those same investors/tourists/exporters DONOT HAVE TO change their money, they can walk into a local Nandos and buy whatever with their forex. Add to that, the unofficial redollarisation where you simply cannot buy some things with local currency and the demand for forex increases exponentially.
This setup is the reason why establishment of a fx market in Zim will be a mammoth task. There is simply not enough demand for local currency to create a balanced market, ie the demand for forex far outstrips the demand for local currency.
Currently the Zim dollar serves no meaningful purpose other than being a vehicle for speculation.
The auction system is more like an elaborate forex allocation mechanism, there is only one entity on the supply side (forex they provide is acquired thru SI directives which force exporters to surrender a portion of their export earnings). This is not a market.
Its ironic because this setup provides the perfect conditions for money changers to thrive. The blackmarket also have the same problem that the auction has (lack of willing forex sellers), but they have an effective method to stimulate the supply they need. This is done by simply providing an exchange rate well above the official one. This differential creates arbitrage opportunities for those who are willing “to go to the corner and change a few dollars for bond”. Eg, those with forex change their money first before buying electricity , because they can get more units per USD by taking advantage of the differences in exchange rates used at Zesa and on the streets. As you can see the blackmarket system works whilst the auction system, does not.
They can meet all they like with these captains of industry bt nothing will come out of it, cause at the end of the day its not the big shops or big manufacturing companies that are the problem. Dambudziko mashops madiki asingabhadhare tax aya anamusiyamwa angovhura ka hardware kake pacorner (ndo issue yekutaga iyoyo) 2-Even if that musiyamwa goes to ppc and buys cement in rtgs he’s never going to sell in rtgs because the fuel or transportation he used he was told to pay in US nekuti hakuna station ikutengesa fuel re rtgs kana iripo inogara isina fuel kana kuti ukasvika uchibva kuona ichiiswa unonzi yakatengwa kare PETROLTRADE MARONDERA KUTAURA IMIMI. Further more kashop kaariku renter kepacorner kaChitanda anenge achidawo US. 3- V.I.D,ZRP, kumapassport uko Us rega ndoririkudiwa kuti zvinhu zvifambe.mapaper e government anotoreka usina kutonyora mutero wemota ne death certificate chete hapana munhu akatora licence asina kubvisa mari since 2007,anotaura kudaro arikunyepa unless atori mwana wa politician vekuti babavake vataura neboys
What about the povo, why was consumer council of Zimbabwe not have a say.
This was just a meeting of Apes in suits
Why was the consumer council of Zimbabwe not represented here
Do these guys understand t
Why was the consumer council of Zimbabwe not have a say here,
Or even the cross border traders association
Even the Vendors Association
Do these guys know that the above represent 70% of the foreign currency circulating in Zimbabwe albeit informally
This was just a meeting of the Bourgeoisie bent on protecting their interests at the expense of the majority
Their resolutions have no force or effect
Ma retailers aya acha broker. Kuma tuckshop sugar 2 usd since hameno. No usd inflation. These retailers have to change there usd prices cause they use the auction rate which has been at 85 to the usd since hameno. The retailers will have to open tuckshops or else.
Just fix the economy not stitching the anus to prevent diarrhea, fix the manufacturing sector and produce here not this thing o loving to import almost everything including water and tissue paper. Why do you allocate forex to someone who wants to import finished goods or even raw materials that we grow here, thats a waste. That auction system should be for producers and job creators, the more goods we produce the more jobs there will be the more they will be bought using the Zim dollar and the more demand will there be to the Zim dollar as we will also be able to export finished goods.
Lets just do away with the usd.our neighbors are using their own currency wani
Policy inconsistence ndoo iri kuuraya nyika ,e.g we still have an S.I that criminalises transcating in USD,,bt now Usd rikutengeswa kum Berau De Change kkk wobva washaya kut zvir kufamba sei
Are these comments published to the real ears or we just telling these stories to each other?