eBusiness Weekly
Business Writer
Market indiscipline remains the main shackle on Government’s neck as the practice is scampering treasury efforts to restore confidence in the local currency and tame price distortions, a senior official has revealed.
This uncouth practice is in most cases driven by some known unscrupulous businesses who are manipulating the exchange rate.
As such, George Guvamatanga, the Ministry of Finance and Economic Development Secretary, said the re-introduction of the foreign currency auction system managed by the Reserve Bank of Zimbabwe (RBZ), was one of the many initiatives to address the foreign currency headaches as well as tame the exchange rate.
Since June 2020 when the forex auction was re-introduced, it has helped in the availability of foreign currency for re-tooling by businesses and meeting other critical foreign obligations.
However, the exchange rate on the illegal parallel market has continued to rise unabated that Treasury said was also due to arbitrage behaviour by some unscrupulous businesses.
Said Guvamatanga: “As Government we are trying our best to address the challenges which the Zim dollar faces. We are looking at the price distortions caused by the exchange rates and most of these challenges we are facing here are now due to indiscipline.
“Businesses are quick to charge in US dollar yet our salaries are in local currency, that is why we say the challenge is a result of discipline.
“But as Government, we will continue to align the foreign currency exchange rates to prevailing economic fundamentals,” he said in a presentation made on his behalf by Martha Mugwenhi, Director Debt Policy, Strategy, Analysis, Compliance and Risk Management in the Ministry during a Zimbabwe Public Debt Indaba.
The Indaba was hosted by the Zimbabwe Coalition on Debt and Development (ZIMCODD) in Harare yesterday.
As at end September 2021, Guvamatanga said total debt amounted to US$13,7 billion, comprising of public external debt of US$13,2 billion and domestic debt of US$532 million.
About 77 percent of the external debt is in arrears (interest and penalties).
Of the total public external debt, US$5,4 billion is owed to bilateral creditors, US$2,7 billion to multilateral creditors, US$221 million to creditors under the 2015 RBZ Debt Assumption Act and US$4,9 billion is RBZ’s balance sheet external debt. The RBZ balance sheet external debt of US$4,9 billion comprised of US$1,4 billion guaranteed debt, US$72 million non-guaranteed debt and US$3,3 billion of blocked funds.
Experts have called on a multi-stakeholder approach to addressing the debt situation with Government, private sector as well as the lenders themselves coming up with a sustainable debt management plan.
Treasury has, however, managed to maintain the wage bill to below 50 percent of total Government expenditure while the re-engagement efforts as well as token payments to international financial institutions are also other strategies towards addressing the debt challenge.
Government has reduced subsidies on fuel while agriculture subsidies are now being meant to benefit the vulnerable communities such as the disabled, orphans and women to ensure their food sustainability.
