eBusiness Weekly
Business Writer
Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, says he is not against foreign currency black market and is prepared to accept premiums of up to 40 percent between official and the unofficial rates.
However, this is contrary to what he said in February this year while presenting his monetary policy statement, where he stated that 20 percent premium was the acceptable figure in other countries.
Said Dr Mangudya in February: “Consequently, the parallel exchange rate premium has reduced to a tolerable band of up to 2 percent, consistent with experiences in other countries.
“In addition, the establishment of an appropriate market-based exchange rate system has assisted in dampening pressures on inflation,” he said.
Addressing officers at the Rodgers Alfred Nikita Mangena Barracks formerly Zimbabwe National Defense University (ZNDU), Dr Mangudya noted the Apex Bank was not against the existence of a parallel exchange market.
He said many countries including Nigeria, Angola, Zambia, Ethiopia, and Malawi, and others across the world made use of parallel markets that operated in an acceptable manner.
“We are not even against the parallel market, we are against the volatility found on the parallel exchange market because internationally, the best practice is that it should not exceed 40 percent of a premium between the official exchange rate and the parallel exchange rate. There is no country without a parallel market but it is about the variance, the premium between the official exchange rate,“ Dr Mangudya.
As part of measures to curb the discourteous behaviour in the foreign exchange market, Dr Mangudya indicated that his institution will resort to its strategy of moral suasion.
“Over the past four weeks, we met the business community to tell them that currency instability is not good for anyone, for business and consumers alike, because as business, you cannot plan if the rate changes every day,” he said.
Dr Mangudya sentiments follow the calls by local business bodies that government should devise strong mechanisms that bridge the confidence and trust gap in the economy to combat threats of economic instability.
The business bodies are of the view that government will find a rationale mechanism of providing the much-needed leadership to deal with threats of instability, the confidence and trust gap for improved national competitiveness
RBZ set up the Dutch Auction system in June 2020 to cater for industry foreign currency requirements after many local companies had resorted to the parallel market to fulfill their foreign currency obligations.
However, the local continues to plummet on the black market with many players demanding upto rtgs200 for the US$1.
However, an analyst said: “A premium as high as 40 percent is too wide as it leaves room for arbitrage opportunities which can be exploited by the so called currency manipulators and speculators whose activities have brought serious distortions in the pricing of goods and services in the country.”
