Captains of industry have exerted pressure on the Reserve Bank of Zimbabwe (RBZ) to clear early foreign currency auction backlogs to achieve stability in the market, Business Times can report.
The pressure by business comes after the central bank is said to have released funds for June allotments, leaving out outstanding backlog for the first five months of this year.
“For some companies, the bids for January to May are still to be settled,” business leaders said in a report seen by Business Times and presented at a meeting with the Financial Intelligence Unit (FIU).
The Zimbabwe National Chamber of Commerce (ZNCC) president Mike Kamungeremu said: “In our discussions we told the authorities to first clear earlier bids and see how we can proceed. We believe the first in, first out approach is vital rather than the last in and first out approach that is used. This disadvantages the companies that have already placed their money to access forex.”
The Confederation of Zimbabwe Industries president Kurai Matsheza recently told Business Times that outstanding earlier bids continued to haunt business.
“RBZ has cleared the bids from number 95 up to around 102 with some bids at around number 80 not settled and with this the problem continues to be there as the monetary authorities have not settled the earlier bids,” Matsheza said.
Business leaders said in the report to the FIU that poor government policies were hurting industry.
“The symmetry between policy pronouncements and practice also sends very strong signals to the market which may be distortionary or affect confidence.
“It is the role of the government through policy and practice to create demand for the ZWL$ in its own business and to defend the ZWL through prudent monetary and fiscal policy.
“We have a misaligned exchange rate regime which is heavily controlled and stifles market forces while creating imbalances in the economy, distortions, and arbitrage opportunities,” reads part of the report.
Companies are also said to be exposed to this arbitrage as the lure of quick money by employees faced with the opportunity to swipe or arrange to swipe for customers who find in-store regulated rates in the formal retail or manufacturing unfavourable.
The report said this chain of arbitrage which leads to the commoditisation of money at many levels needs to be eliminated by efficiency in the exchange rate setting mechanism which can only be achieved by a market determined system.
Business re-iterated its support for the maintenance of a multi-currency system but with a market price between currencies in the basket of currencies that business uses.
“In Zimbabwe, conditions permitting, the ideal situation is to have a soft currency for local trade and hard currency for international trade. This ideal situation can only become a reality after we have achieved value for the ZWL so that it can perform its function as a store of value.
This is what will make the market indifferent to what currency they are holding and not regulations. Monetary policy options should be deployed to achieve this imperative. The Zimbabwe exchange rate situation has had an unsustainable parallel market premium which continues to rise.”
Experts said a market determined exchange rate should be based on Willing Seller and Willing Buyer and not the other way round to ensure that sellers can bring their forex to the market.
The interbank market (Willing Buyer Willing Seller) has remained very thin with hardly any meaningful trades for business taking place.
“We are reliably informed that sellers have not been permitted to request what they believe is a fair rate for their currency holdings,” the business said.
First Capital Bank chairman Patrick Devenish told delegates at a recent ZNCC congress that the authorities need to enhance the interbank system to accommodate larger corporations.
“There is a need for the government to remove some controls on the Willing Buyer Willing Seller [WBWS]system to become the real WBWS platform to perform its duties so that large entities can utilise otherwise as it stands the platform is too thin for firms and is not properly functioning,” Devenish said.