It’s time to unplug the black market from forex


Sunday mail

Victoria Ruzvidzo

Zimbabwe has a legendary penchant for miscarrying or shooting themselves in the foot at the most inopportune moment.

The current chaos in the foreign exchange market is of no use and threatens to reverse much of the economic gains recorded so far. But that shouldn’t be allowed to happen.

We must jealously guard our achievements. It took a lot of sacrifice to get to where we are.

There are only two months left at the end of the year as we anticipate an economic growth rate of at least 7.8%. Everything was going in this direction until recently, when the local currency was criticized, the parallel market rate was on a wild ride.

There are too many divergent views on the cause of the chaos, with the central bank accusing irresponsible traders of raising the shadow market rate while the latter points a number at the government. All of this takes time and is energy usurper. What is needed is a quick diagnosis of the problem and the implementation of a solution that puts an end to the spiral.

In fact, we cannot afford to retire to bed as the situation continues to deteriorate. We need more action and pretty soon too.

We note the efforts of the central bank, government and businesses to reason together, but the current standoff can only make matters worse. We have to be brutally honest with each other in search of solutions.

All parties must sit down and find quick solutions. The National Sports Stadium is large enough to accommodate representatives of all stakeholders if required.

It is no longer a question of who makes the most eloquent arguments, but we have to roll up our sleeves to find a viable solution.

That the black market rate rose to between $ 180 and $ 200 to the dollar against an auction rate of $ 90 to the dollar is a gross anomaly that creates room for arbitrage and the shenanigans that have started to resurface on the market. Marlet.

Last Monday’s meeting between RBZ Governor Dr John Mangudya, officials from ministries of finance and industry and business sector representations gave a head start to the processes aimed at redressing the current situation. . The commitment of companies to tame the behavior of some of its members is welcome as the central bank has pledged to respect its end of the bargain by guaranteeing a shorter timeframe for the allocation of bids and the tightening of the money supply in as part of its currency targeting strategies, among other things.

The camaraderie at the meeting should be reflected in the market. Since yesterday, volatility has not eased.

Attorney General Kumbirai Hodzi said he would not back down in his efforts to trick business executives, companies and other illegal individuals into illegal transactions on the black exchange market. The RBZ’s financial intelligence unit has drawn up its arms, saying it will continue to denounce and shame, and bring to justice those caught on the wrong side of the law.

The idea is to instill discipline in the market and allow downhill trading.

But on the other hand, the business sector has called on the government and its concerned arms to refrain from arresting executives as this, as they say, will further destabilize the market.

What we can decipher is the need to find a balance. The parties concerned need to come to an agreement so that more lasting solutions can be sought. Just making commitments on paper won’t work. Real and practical solutions must be sought and implemented urgently to stem the spiral of the black market.

The prices of most goods and services have risen significantly, threatening to thwart efforts that have seen inflation plummet over the past year. Consumers got stuck.

An economist with extensive knowledge of African financial systems, Dr Tim Rainhard, published an article last month that seemed to blame errant behavior more than anything else.

He noted that some large companies were funding third-party institutions on their behalf to access foreign currencies in the auction market on their behalf, while suggesting that large entrepreneurs were fueling the parallel market as they dumped large amounts of their payments. in this market looking for the dollar. He suggested that the need to hedge against inflation, recalling the behavior of 2007-2009, had increased the demand for dollars in the parallel market.

“The exposure and shame of foreign currency abusers by the RBZ should be broadened to include the offending entrepreneurs and large corporations who are confronted with their surrogates because their shenanigans are a cancer on society. Participation in both auctions as well as tenders for infrastructure projects should be restricted to law-abiding corporate citizens, with banks religiously sticking to the “know your customer” principle by allocating foreign currency and monitoring suspicious transactions, ”he said.

“Having said that, it is up to us, the citizens of Zimbabwe, to avoid negative and unnecessary behavior that is not supported by evidence; we can heal such negativity by first believing in ourselves and considering 2 Corinthians 5 verse 7, which says “for we walk by faith, not by sight”.

“Most importantly, there must be categorical efforts to produce for local consumption and exports to stop the bleeding of foreign currency through imports of trinkets that might otherwise be produced locally. “

But the Zimbabwe Confederation of Industries, in its update on the monetary situation, pleaded with the government to refrain from denouncing and shaming.

“The biggest risk the economy currently faces is an inappropriate policy response to rising parallel market premiums. Suppressing informal foreign exchange trading in the absence of a functioning formal market will have catastrophic consequences for the economy, ”his newspaper said.

The industry representative body suggests that the backlog in allocations be cleared while the available foreign currency should be cleared.

It proposes, among other measures, a tightening of the currency auction market to ensure the settlement of bids within 48 to 72 hours.

For its part, the central bank has promised a faster allocation and tightening of all outstanding points. The current chaos in the market is certainly not irreparable. It simply requires a full commitment of all parties to find a lasting solution.

The economy has rebounded in the last 12 months or so with some interesting statistics in terms of inflation, economic growth, productive capacity and recovery of sectors such as agriculture, mining, manufacturing, etc. .

Greed cannot be allowed to reverse these gains. For their part, the government and the central bank should listen to the real concerns of the industry, fine-tune the auction system and ensure the smooth running of the market.

For most of this year, there has been a virtual convergence of parallel market and auction rates. All the factors that have destabilized this situation must be addressed.

Demand and supply issues are a factor. The Reserve Bank should respond in time to genuine foreign exchange demand for greater confidence as we need to increase exports to stabilize the dollar. The import bill must constantly decrease.

Zimbabwe can ill afford any economic regression. On the contrary, we expect even better performance next year given the measures put in place to create a more conducive environment.

The prices of goods and services must fall and the value of the local currency restored. It can be done

In God I believe!

Twitter ID: @ VictoriaRuzvid2; E-mail: [email protected]; [email protected]; WhatsApp number: 0772 129 992.

Source link

Previous Tax breaks rob FG of 5.16 billion naira in 12 months
Next Wemlo announces revolutionary loan brokerage system