You cannot copy content of this page

Zim Market Rejects Local Currency

The local market is expected to fully dollarize earlier than expected if authorities fail to reinforce levers to strengthen the local RTGS dollar, amid expert fears of the collapse of the RTGS dollar, 263Chat business has learnt.

The RTGS Dollar has tumbled close to 150 percent since February this year, and the exchange rate volatility is expected to spell out further erosion for the local currency.

Finance and Economic Development Minister Mthuli Ncube has already stressed that the era of the US dollar dominance on the market is over, as the establishment of a local unit of payment will be central to the government’s economic reform agenda.

The recently introduced interbank foreign currency market is hence expected to stabilize foreign exchange rate complexities but speculative behaviour remains the biggest threat to stability in the market, likely threatening to further erode the RTGS dollar value.

“As long as there is a mismatch between demand for foreign currency and its supply, the days of the RTGS dollar are numbered. Authorities should ensure that the interbank market is fully organized to meet the demand gap for producers,” economic analyst, Pepukai Chivore said.

Since last week, most retail outlets in Harare’s CBD have reverted to USD as the medium of exchange.

A snap survey by 263Chat Business revealed that save for major food retailers such as OK, TM-Pick n Pay, Choppies and Spar, most medium to small sized businesses now prefer the USD as the formal medium of exchange, with prices in RTGS dollars pegged at an exorbitant value beyond that prevailing on the parallel market.

While the interbank and parallel market rates now trade at 5.4 and 8.2 respectively against the USD, most retailers are setting a rate of between 9 and 10 RTGS dollars against the USD for RTGS purchases.

Market watchers believe the trend is meant to discourage purchasing of goods in RTGS, while incentivising purchases in USD.

“We cannot sell products in RTGS dollars because we risk failing to restock. The exchange rate is constantly going up. The USD remains constant so charging in the USD currency will help us remain in business that is why we no longer accept RTGS,” Oliver Ruzvidzo, a television sets dealer told 263Chat Business.

However, the government has been discouraging manufacturers of goods from charging in USD, a move analysts say was unfair and crippling to the industry since the same goods are ultimately sold in USD once retailers resale.

But a return to dollarization will have adverse effects on the Central Bank’s monetary policy autonomy, monetary authorities fear.

“Pertaining to the demonitisation of the RTGS dollar and adopting the US dollar, what happened when the US dollar was adopted basically as a defacto currency, during the time that the Honourable Member as a Minister, what he (Biti) did is he destroyed the country’s ability to conduct its own monetary policy completely,”

“So the Central Bank was taken out of all monetary policy ability and what was left was fiscal policy only. Those are the facts and I have said that from the beginning that we need both legs for macro-economic management, the fiscal and monetary policy legs,” the Finance Minister told Parliament last week.

The Minister is expected to strengthen levers to cushion the RTGS dollar when he present his Mid-Term Budget Review statement in July.

 

 

 

 

 

 

 

 

 

error: Content is protected !!